If you move regularly from job to job, you may have built up a whole collection of pension schemes during your working life.
That's fine in theory, but the trouble is when your pensions are here, there and everywhere, it's very difficult to keep track of them all.
The chances are if you have an older-style pension which has been running for years; you may find the charges are pretty high compared with newer schemes. And it probably won't be invested in the best possible place either.
So, what should you do?
Surprisingly few pension savers know that pensions can be transferred. So, if you're unhappy with how a fund is performing, you have every right to move it somewhere else.
But, as with all things pension-related, switching is not a decision to be taken lightly. You'll need to make sure you aren't giving up any valuable benefits - or triggering any nasty penalties - when you move the scheme.
Having said that, consolidating all your pensions into one new and improved home can make a lot of sense. Let's take a look at how to go about it.
How to transfer your pension:
Step 1: Decide if it's worth it
This is the tricky bit - deciding whether it's better to stick where you are, or take the plunge and move somewhere new.
To help you make up your mind, the first thing you need to do is ask your pension provider for a valuation of the scheme so you can see how well it has performed. Then get a 'transfer value' which shows you whether there are any exit penalties when you switch the scheme. Remember, pension valuations and transfer values fluctuate daily.
With-profits
Newer schemes may not charge for transfers, but older pensions - particularly those invested in the not-so-good with-profits funds - could hit you very hard if you leave.
The worst performers of the with-profits world could deduct as much as 20% of your pension fund when you transfer it. If that happens, it may be worth hanging on to see whether the penalties ease. If the performance of the with-profits fund improves, exit charges are likely to be reduced.
If the prospects for the fund don't look good, it may be better to suck up the exit penalties, and hope you can recoup some of your losses in a new, stronger-performing fund.
Lost benefits
As well as exit charges, you'll also need to take a look at the benefits you might be giving up if you transfer. Firstly, if you're lucky enough to have an old final salary scheme, it's actually highly unlikely that a new scheme will be able to match the benefits on offer. So, a word of warning here: be very careful before you move a final salary pension, because it will almost certainly be a mistake.
Secondly, some pension schemes offer valuable Guaranteed Annuity Rates (GARs) which means the income you receive when you retire is likely to be significantly more generous than you would get on the open market. This could apply to schemes opened in the 1960s right up to the mid 80s. Read Could you increase your pension income by half? to find out more. You really must think twice before you transfer and lose your GARs.
Don't panic if you can't make head nor tale of your pension statements. If you're struggling with these decisions, it's a very good idea to seek help from an independent pension adviser. But, don't forget, they will charge for any recommendations.
Step 2: Choose a new scheme
If you find some of your old pensions are looking a bit dodgy, it's time to find a better scheme to move them to. What you're looking for is a pension with low(ish) charges, decent performance, flexibility and investment choice.
Of course, it's your call, but I'm a big fan of low-cost self-invested personal pensions or SIPPs. Take a look at How to pick your first pension for some guidance on what to look for. The principles here apply just as much to pension transfers as they do to first-time pension savers. You might find how to choose the right SIPP helps too.
Step 3: Choose how you want to invest your new pension
As well as picking a new pension provider, you'll also need to choose some pension funds where you can invest your transferred pension and any future contributions. Take a look at my recent article Why pension savers should still trust the stock market for my take on how to save for retirement.
Step 4: Compare projections
Once you've chosen your favourite new pension and selected your pension funds, it's a good idea to ask for a projection of retirement benefits. Do the same for the old funds in your original scheme and compare the two.
Remember that projections can only give you a very rough idea of benefits because they are based on assumed growth rates. But they will allow you to compare the charges, and hopefully you'll be able to see how much cheaper your new pension is.
Step 5: Start the transfer
When you're happy with everything, start the transfer. You'll need to complete an application for the new pension as well as transfer forms to move over your old pensions. It may take some time to complete the transfer if your old pension provider is a bit lacking in the efficiency department. Feel free to bug them relentlessly if you feel they're dragging their heels!
When all your pensions are in one place, it will be so much easier for you to judge how well they're doing, and make sure you're on track for the retirement you always dreamed of. Good luck!