When should you switch pension provider?

13 August Reading Time: 4 minutes

Britons are notoriously disengaged with their pension schemes. Indeed, research from My Pension Expert found that 53% of Britons are satisfied to let their pension provider run their plans (workplace or otherwise) without any further investigation.

Admittedly, UK adults may have more immediate issues to deal with – particularly throughout the previous 18 months – however, this ‘out of sight, out of mind’ mentality can harm their future finances. So, it is vital that people explore the services and management strategy offered by their existing provider to establish whether the scheme suits their needs.

That said, it can be difficult to know whether existing providers are in line with one’s retirement goals. So, for those unsure whether to bite the bullet and switch providers, here are a few key points to consider…

Could my provider fees be lower?

All pension providers impose management and administrative fees on scheme members. However, these fees vary between providers. For example, pension trusts set up before 2001, before stakeholder pension charges were capped, tend to be higher than modern pension schemes. This could ultimately remove a large chunk of retirement savings.

So, if savers are concerned about their fees, it could be worth investigating different provider options. After all, switching providers could lead to a significant reduction in costs.

Should I consolidate my pensions?

Today, the average employee holds six jobs throughout their working life. As such, people are likely to hold multiple pension pots accumulated via various workplace pension schemes – and these can be easy to lose track of.

So, people struggling to maintain multiple pots would be wise to consider consolidating all their funds into one manageable pot. This will certainly be easier to keep track of, whilst allowing the pot to grow to a healthy size.

Could my pot be performing better?

As with any investment, the value of one’s pension pot is likely to fluctuate over time in response to various external market factors. However, depending on how they are invested, certain schemes could perform better than others. This could be for a variety of factors, such as the scheme placing money in riskier investments or having a more diverse portfolio.

Individuals who may have a higher tolerance to financial risk (this will depend on their personal preferences and financial situation) may therefore be interested in switching providers who offer a greater risk-reward ratio. Of course, given the significance of this decision, independent financial advice must be taken before individuals make any major decisions. However, in the meantime, it could be beneficial to explore different scheme options to see if there is any potential to improve the performance of their pot.

Is my scheme flexible enough?

Those with their pension in a drawdown scheme may be surprised to find that not all plans offer the same levels of flexibility. For example, some providers allow customers to set their own retirement income withdrawal limit; however, they will charge extra if a client wants to adjust this amount throughout the course of their retirement.

It would therefore be beneficial to understand the terms and conditions of adjusting withdrawal amounts in retirement. If an individual’s current scheme doesn’t offer suitable flexibility, switching providers could be beneficial.

A note on advice

As is the case with any major financial decision, people should not commit to switching pension providers until they have consulted an independent financial adviser.

At My Pension Expert, our team of independent financial advisers conduct a thorough audit of an individual’s financial situation, as well as discussing their retirement goals with the client, before making a final recommendation as to whether switching providers is necessary. Further, they conduct annual audits for clients to ensure that their existing provider remains appropriate, should circumstances change. This grants clients access to all the necessary information to make an informed decision about their pension provider.

Switching pension providers may sound difficult, but it needn’t be. Provided that people carefully consider their requirements and seek the appropriate financial advice, Britons should be able to find a pension provider to suit their individual needs and achieve their retirement goals.


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