There is a lot to think about when you are starting a new job, but one thing that may not be at the top of your mind is considering what happens to your pension when you change firms. It can be complex, so you need to understand the specifics of your existing pension and what your new firm is offering.

Switching firms usually means leaving one pension scheme and joining another, established by your new firm. What happens to the old pension? What can you do with it? How much say do you have over how it is run?

Regrettably employees across many professions, not just the law, have one or more pensions that they have contributed into whilst working for previous employers. There are noises about “pension dashboards” showing you all previous pensions and of “pensions for life” where you take a policy with you from job to job. The change in government may or may not result in changes of this type, so for now, what should you do?

1. Understand who the provider(s) is of your old pension(s);
2. Understand the pension policy(ies); and
3. Understand the investment of your old pension(s).

What’s to understand?

The pension industry is constantly undergoing mergers and acquisitions. It is not uncommon for your pension provider to change whilst you are employed and contributing as the firm may have decided there is a better offer available. It is also possible that a provider may have “sold its book” to another firm, so knowing who is administering your policy is the first step.

What are they charging?

Despite regulatory focus on fee transparency across financial services over the last two decades, it is not always clear what you are paying. Worse still, it is not often clear what you are getting. So how are you supposed to know that you are getting value for money?

Has the policy kept up with all of the rule changes?

Taxation and Pensions are the play things of government policy makers. By 2024, it is not entirely unreasonable to suspect that these challenges ie. what should pension law be and what should tax law be, could have been solved for good. Too much to ask? Well there is no  sign yet that any UK government, new one included, nor any major country is settled on how these things should work. So the changes will continue, sure as death itself!

Can I move or consolidate my pensions?

It depends. It may or may not be possible, and it may or may not be advisable even if possible. The only way to be sure is to conduct thorough research and analysis of the individual policies, obtaining details from the provider of the old pension and your new pension as to whether they will accept a transfer, assuming that it is possible and advisable.

How is it invested?

Many workplace schemes offer employees some simple alternatives. The problem is that many of these by design will result in poor outcomes for the employees. How so?

Well, they are usually categorised into industry standard jargonistic options like “Balanced Fund”, “Cautious Fund” or worse “Lifestyle” or “Target Date” funds. If (a big if) you are actually asked about or assessed for your attitude to risk, this will inevitably lead to the majority of people (68% due to the normal distribution of outcomes) selecting the middle or balanced option. For a young person, in the vast majority of cases, this will be an extremely expensive miscalculation. Why? You will be giving up expected returns over a long period of time that will compound so that your eventual pension pot could be substantially less than it could have been.

What is the answer?

Seek professional advice. Your clients seek you out for your professional knowledge and expertise to help them solve problems that involve technical issues that they may not completely understand. Your pension is likely to be your biggest asset after your home. You will spend your entire career making contributions and investing that pension to plan for your life in retirement.

To help you get started, we are offering a no-obligation pension review, free of charge exclusively for lawyers until the end of August if you would like to discuss your options.

Adrian Johnson