RACHEL LACEY saved £1,000 a year in charges by switching her pension

For years I did not postpone anything about my old work pension. I had paid minimal attention to the plan since I stopped putting money into it, and only remembered its existence once a year when the annual statement dropped through my mailbox at home.

My neglect was typical of most workers in the UK. Normally we are forced to open a company pension every time we start a new job, which means that when we retire we generally have some of them built up – making it more and more difficult to keep up with them all. It’s no wonder there are old occupational pensions worth around £19bn that have been completely forgotten.

I hadn’t lost sight of my old pension, but I knew I wasn’t getting good value. I paid more in fees than I had to, and was invested in over-cautious funds that were unlikely to provide the best returns in the long run. I paid about a thousand pounds a year too much, but I still didn’t switch.

Somehow I assumed moving out of retirement would be a serious faff. I’m comfortable switching insurance and energy supplier – before deals were pulled from the market – but was put off by the thought of transferring thousands of pounds in pension money.

I couldn’t have been more wrong. I have decided to convert my old company pension into a self-invested personal pension (Sipp), which I have been managing since I became self-employed two years ago.

The advantage of this option is that the wealth platform that manages my Sipp charges a flat fee, so I wouldn’t pay more for it to host my work retirement funds as well. By transferring I would wipe out the burden on my work pension, but no longer pay for my Sipp.

Anyone can set up a Sipp on an investment platform such as Hargreaves Lansdown, AJ Bell, Vanguard, Fidelity or Interactive Investor. It allows you to choose what to invest in – from a wide range of stocks, funds and listed investment trusts.

Other options include moving your pension to an existing workplace plan or opting for a consolidation company, which creates a new pension to bundle your existing pensions, such as PensionBee.

I logged into my Sipp and requested the transfer within a few minutes. All I had to do was fill out a form detailing the schedule I wanted to move and specifying whether I wanted a ‘cash’ or ‘in specie’ transfer.

I went for a money transfer – which meant my retirement investments were sold and the proceeds went to my Sipp to invest.

With an in-specie transfer, your investments are transferred immediately, but this is only possible if the same investment options are available with the new provider.

Cash transfers are faster as they are easier and I was told the transfer would take two to three weeks.

Fortunately, the two companies involved (Scottish Widows and Interactive Investor) did their respective jobs quickly and ten days later the money was transferred. Then all I had to do was decide what to invest it in.

I didn’t want to take my money out of the market any longer than I needed to, but by this point summer vacation had started and my thoughts were with the kids and packing to go away. So I decided to add 80% Equity to my existing stake in Vanguard LifeStrategy. This is a low-cost tracker fund that invests in stocks of thousands of companies around the world, 20 percent of which are global bonds. I can always move my investments on time.

The whole process took less than two weeks, I was kept informed at every key stage and there were no headaches along the way.

By switching I have avoided about £1,000 which I paid each year in retirement costs and I am still paying the same £240 a year platform fee I always paid for my investments (before fund costs).

It’s hard to quantify how much that will bring me in the next twenty years. But I’m confident it will make a significant difference to the heat from my radiators and the contents of my fridge when I eventually retire.

There is no guarantee that you will save money by consolidating pensions, as some existing workplace plans can already offer a good deal. But sometimes the savings can be significant.

In particular, some older life insurance plans can charge high fees, as much as one percent or more per year. This may not sound like much, but it adds up quickly. For example, on a pension of £120,000 you would pay £100 a month – an amount that comes straight out of your pension pot, perhaps without you even realizing it.

You should be able to find your pension costs on your annual statement, but if it is not clear, you can ask your administrator directly. I’m a self-confessed admin phoob so I find it easier now that I have all my retirement savings in one place. That way I can keep track of what I have and what I invest in. Ed Monk, associate director of personal investing at Fidelity International, says, “The big advantage of transferring company pensions to a Sipp is that you have a lot more control over how your pension is invested.

“Sipp providers tend to offer a wide variety of investments for investors of all levels.”

However, switching is not for everyone and there are risks.

You don’t have to be a seasoned investor to manage your own retirement, but if you choose a Sipp, you do need the confidence to choose your own investments.

Platforms provide plenty of support for newer investors, including easy-to-start fund recommendations and ready-made portfolios.

There is also a risk around timing. Cash transfers mean you will be out of the market and while you may be lucky and miss a fall, there is also the chance that you will lose a rally. Rebecca O’Connor, head of pensions and savings at Interactive Investor, says, “You also need to see if you’re giving up valuable benefits by switching.”

She adds that some pensions offer valuable guaranteed income or an earlier minimum retirement age — benefits you may not want to give up in a hurry. Some pensions taken out before 2010 also have guaranteed annuity rates, which can be valuable and probably not worth giving up.

Another word of caution is the exit charge. This is a levy levied by providers when you leave your pension. Since 2017, these have been removed from new schemes and capped at one percent for people over 55 on existing schemes.

If you’re planning a wire transfer, you’ll need to know if you’ll be charged any fees and weigh them against your potential profit.

My transfer was easy as I already had a Sipp to transfer the money to. But Interactive Investor’s O’Connor says it’s important to do your research and exercise caution when opening a new retirement plan.

“Be careful,” she says. “Scammers are there and after you retire and they have plenty of clever ways to part you from them. So if you decide to transfer, make sure you place your pension with a reputable company that is overseen by the Financial Conduct Authority.”

You can see all the details of an investment or retirement business at register.fca.org.uk. Also read the ‘avoid scams’ page of The Pensions Regulator at thepensionsregulator.gov. uk/nl/pension scam.