Considering switching pension providers? Here’s what you need to know.

Searching for the right pension provider may seem like an overwhelming and incredibly time-consuming task.

Such assumptions result in many consumers settling for “big brand” providers, rather than shopping around. Indeed, many assume that renowned household brands will provide the best deals. However, this is not always the case; and failing to research different options could mean savers are stuck in a scheme that does not suit their specific needs.

So, for those questioning the suitability of their existing provider, what factors need to be considered before a final decision is made?

Consumer protections

Many consumers are reluctant to shop around for a better deal because they worry about the level of protection other pension schemes will offer. In other words, people tend to have concerns about what will happen to their money, if the pension provider is unable to pay their pension.

Luckily in the UK, all FCA authorised pension schemes offer the exact same protections. This means that if a provider is unable to pay a client their pension, they are entitled to be compensated for up to 100% of the value of their pension pot. Claims can be made under the Financial Services Compensation Scheme.

This reassurance offers consumers the freedom to explore numerous pension schemes, safe in the knowledge that their money will be protected.

Although, if there is any uncertainty about a provider or scheme, consumers should always consult the FCA’s online register. If the scheme or provider in question is not on the register, it would be advisable to proceed with caution – the same protections might not be in place and consumers could lose out financially.

Tailor to retirement strategies

Consumers must also consider whether a pension provider suits their personal retirement strategy.

It’s important to understand individual saving preferences before committing to a pension provider. Some providers, for example, set minimum and maximum contribution limits. This might work for some people, but others may want to contribute more or less than this. Additionally, providers may not allow one-off lump sum contributions, which may not benefit those wishing to place a sizable portion of an annual bonus in their pot.

Consumers should also consider their appetite for risk when researching differed providers. For some, a diverse pension fund may seem more attractive, with the risk spread out over numerous investments. Others, meanwhile, may enjoy increasing the risk to potentially receive a higher reward on their pension.

Understanding one’s personal retirement strategy will undoubtedly help to pinpoint ideal qualities in a pension provider, thereby making the search much more streamlined.

Competitive rates

Similar to other financial products, such as savings accounts or mortgages, competitive rates should be central to the decision-making process. Rates can vary widely between providers, so it’s important to shop around and compare.

Additionally, providers are often willing to compete for prospective clients and price-match rates. As such, consumers shouldn’t be afraid to ask prospective providers to match better rates available on the market. Savers may be pleasantly surprised by the rates they could ultimately achieve.

Don’t ignore the small print

As is the case with any major financial decision, it is important to understand the small print, in order to avoid any hidden charges.

For example, some providers apply exit fees which can make it harder to switch providers in the future. Needless to say, consumers prone to shopping around for a better deal would be wise to avoid providers with such a policy.

If in doubt, seek advice

If faced with uncertainty, consumers should seek independent financial advice. Advisers will take into account an individual’s financial circumstances and work with the client to find the most suitable pension provider available.

Whatever one’s requirements for a pension provider, there are plenty of options available. However, it’s important not to rush into any decisions. Conducting thorough research and seeking advice where necessary will certainly help to set consumers on the path to a financially secure retirement.