Should I Restart Pension Contributions into an old Plan?

30th June 2018

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should i restart an old pension

If you’re restarting pension contributions after a break, should you use an old plan or start a new one?

To help make that decision consider the following 4 questions: 

  1. What are my Plan Charges?
  2. How is my pension fund invested?
  3. Does my plan provide flexibility and choice before, at and after retirement?
  4. Am I getting excellent administration and helpful service and support?

These apply whether you’re looking at restarting an existing plan or setting up a new one. So start by getting a baseline with some information on the plan that you might want to restart. 

To do this, contact your pension provider and find the answers to the following 4 questions:

1. What are my Plan Charges?

You want these to be low. It’s really important to know what you’re paying because the charges can erode your fund. Pension charges vary from annual management fees to expensive exit fees. 

There are so many variations particularly on older pension plans that I’m going to cover it in a separate article. 

In the meantime, check out ‘Top Tips for your Pension Scheme Charges’ from the Government’s Pensions Advisory Service website. I’ve put the link at the bottom of this article.

2. How is my pension fund invested?

  • Are the funds you’re invested in suitable for how you feel about risk/reward and your timescale? 
  • What’s the asset mix? This is how much is in cash, shares, government securities etc.
  • How much of your total fund is invested in the ‘riskier’ areas such as UK and overseas equities, or property? 
  • Compare this to the more ‘cautious’ areas of cash, fixed income or bonds. Note that unless you’re invested 100% in cash both ‘risky’ and ‘cautious’ carry a risk of loss. 
  • How do you feel about the investment risk you’re taking? For example, people who consider themselves yourself ‘average’ risk takers usually prefer 50/50 between riskier and cautious assets.
  • What’s the  past performance of the funds? What is the % return over the last 12 months and longer? It’s not an indication of what will happen in the future, but find out how the short and long term returns compare to other similar funds.

3. Flexible Benefit Options

The new pension rules introduced in April 2015 mean we have lots of choice and freedom over how we take money from our pension funds. 

Make sure that your provider gives you access to those freedoms and doesn’t have their own rules that make it complicated or more expensive.

4. Administration and Service

A good test of the service standards and administration of your pension provider is how easy it is for you to get information either online or over the phone. 

Take note of this, because for me poor admin and slow response times speak volumes about the company you are dealing with. If it’s bad now, what will it be like when you want to draw your money out?

Next Steps

By now you’ll have a good idea of what you’re looking for and what you want to avoid. If your existing provider scores high on all 4 areas you might not need to look any further. If not, use the knowledge you’ve gained to find a new one. 

You can talk to an independent financial adviser or find out more from The Pensions Advisory Service

Updated: June 2019

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Risk Warnings

This article and the information on this website is not personal advice. It’s only intended to give you a brief summary or highlight a particular issue for you to investigate further. It is based on our current understanding of legislation and HMRC guidance which can change and is correct as of the date of the post.

If you’re in any doubt whether a particular course of action is suitable for your circumstances, you should seek professional advice. Tax rules can change and any benefits depend on individual circumstances. And, if you are unsure any reliefs are applicable to you, you should consult your accountant or HMRC.

The value of investments and any income from them can fall as well as rise, so you could get back less that you put in. Past performance is not a guide to the future. It cannot provide a guarantee of the future returns of a fund.

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