AJ Bell launches ‘ready-made pension’ to assist discover and merge previous pots

  • A pension finding and consolidation service is included for one annual fee 
  • It’s 0.45% if you put pots in AJ Bell’s cautious, balanced or adventurous funds
  • What to check before moving a pension: Find out below 

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AJ Bell has created a new ‘ready-made pension’ to help people find and merge their old pots into a single plan.

The new deal, costing 0.45 per cent a year, builds on AJ Bell’s pension finding tool launched last year, and will compete with many similar services promoted as an easy way to combine your retirement savings – from PensionBee, to Lloyds Bank, which launched one last month.

Savers often stack up a lot of retirement pots during their working lives. 

It is sometimes, but not always, beneficial to merge them with your current workplace pension scheme, or move them to a private pension provider. Fees on old and new schemes are one of the top items to check before deciding.

Merging pensions: Stacking up all your pots in one place is not always advisable because you might valuable benefits when you move them - find out what to check first below

Merging pensions: Stacking up all your pots in one place is not always advisable because you might valuable benefits when you move them – find out what to check first below

What AJ Bell’s new ‘ready-made pension’ service offers

A pension finding and consolidation service is included in an all-in-one annual fee, which is 0.45 per cent, if you put your pots in one of AJ Bell’s three growth funds – cautious, balanced and adventurous.

A responsible investing fund costs 0.60 per cent a year. There are no additional charges for buying or selling investments.

After pots are moved to the firm’s ready-made pension, customers can access the account through the AJ Bell investing platform* on a browser or mobile app.

AJ Bell’s standard platform charges are a 0.25 per cent annual account fee on fund holdings, with a £1.50 charge for buying and selling funds and a £5 charge for buying and selling shares. 

It says: ‘The service finds pensions based on the name of the customer’s former employer or the name of the provider they opened the pension with, although not all pensions can be found and combined this way and some can’t be transferred without financial advice.

‘AJ Bell conducts the admin involved, making combining pensions hassle-free for customers. Customers can see how the search to find their pensions is progressing by logging in at any time.’

AJ Bell adds: ‘Combining pensions makes it easier for people to keep track of their retirement savings and plan for the future. In many cases customers will also be able to cut costs significantly, especially those with legacy pensions charging higher fees.

‘Charges can have a significant impact on long-term investment returns, meaning individuals could be left with a significantly higher pension pot at retirement by reducing fees.’

Lloyds Bank’s new app-based ready-made pensions, which is run with Scottish Widows and on offer to the group’s 21.5million banking customers, is the first time a big bank has launched a product of this kind.

It allows people to consolidate existing pension pots or create a new one through their Lloyds Banking app, and has an annual account fee of 0.3 per cent, or a minimum of £5 a month. Ongoing investment charges are 0.24 per cent and there is a transaction cost of 0.14 per cent.

PensionBee’s fees decrease the bigger your pot. Customers pay between 0.50 per cent and 0.95 per cent a year depending on the type of pension plan they opt for, but this halves on the portion of savings over £100,000.

If you are saving into a workplace pension with your employer – which also makes free contributions into your pot –  it is likely to have used its scale to negotiate low fees.

It is worth checking what it charges and considering whether it will be cheaper and more convenient to move your older pensions there.

That is assuming they don’t have benefits which mean it is better to leave them where they are – see below.

Account charge Charges notes Fund dealing Standard share, trust, ETF dealing Regular investing Dividend reinvestment
AJ Bell*  0.25%  Max £3.50 per month for shares, trusts, ETFs.  £1.50 £5 £1.50 £1.50 per deal  More details
Bestinvest* 0.40% (0.2% for ready made portfolios) Account fee cut to 0.2% for ready made investments Free £4.95 Free for funds  Free for income funds More details
Charles Stanley Direct* 0.35%  No platform fee on shares if a trade in that month and annual max of £240 Free £11.50 n/a n/a More details
Fidelity* 0.35% on funds £7.50 per month up to £25,000 or 0.35% with regular savings plan. Max £45 per year for shares,  trusts,  ETFs Free £7.50 Free funds £1.50 shares, trusts ETFs £1.50 More details
Hargreaves Lansdown* 0.45% £45 annual cap for holding shares, trusts, ETFs in Isa Free £11.95 £1.50 1% (£1 min, £10 max) More details
Interactive Investor*  £4.99 per month under £50k holdings, £11.99 above, with £10 extra per month for Sipp £3.99 per month back in free trading credit (does not apply to £4.99 plan) £3.99 £3.99 Free £0.99 More details
iWeb £100 one-off (Free until end of June 2024) £5 £5 n/a 2%, max £5 More details
(Source: May 2024. Account % charge may be levied monthly or quarterly

What to consider before moving your pensions? A 10-point checklist 

Combining pensions in one place can cut down on admin and work out cheaper.

But it is not always advisable because you can risk losing valuable benefits when you leave an old scheme. You might find it’s worth rolling up some old pensions together, but leaving others alone.

Here’s what to check before making a decision.

1. Fees on old and new pension schemes

You should check charges as they can make a serious dent in your future returns.

2. Where are your pensions invested

Past returns are not a guide to the future, but you should investigate where your money will be held. Read our guide to carrying out a healthcheck on investments.

3. A private provider versus your work scheme

Pension consolidation firms have sprung up to help people manage all or most of their pensions in one place, and this can be cheaper as well as more convenient.

However, your current workplace scheme is likely to have used its scale to negotiate lower fees too.

Rolling up your older pensions into your existing workplace pension might be the handiest option, especially if you want to cut down on admin.

4. Guaranteed annuity rates

If these are high it can be worth sticking with an old pension and using it to buy an annuity.

You have to get paid financial advice to move a pension worth £30,000 plus with a GAR attached.

5. Guaranteed fund returns

These are rare but it is worth checking the small print to see if you benefit.

6. Bigger lump sums

Some older company pensions allow you to take a tax-free lump sum of more than the typical 25 per cent.

7. Large exit penalties

Most default work pension funds are trackers with cheap charges these days. If you have a costly old pension with restrictive investment choices you could weigh the benefits of moving despite penalty fees.

Exit fees are capped at 1 per cent after you reach the age of 55.

8. Ongoing employer contributions

You will be getting free employer contributions into your current work scheme, and you don’t want to lose that cash coming into your pot.

9. Protected pension ages

It depends on the scheme rules so check them, but you might not want to lose the opportunity to access a pension at 50, especially if you have several others which will kick in later.

10. Final salary pensions

Outside the public sector, generous final salary pensions paying a guaranteed income until you die, plus valuable death benefits to surviving spouses, have virtually been wiped out.

They are the most generous and safest pensions available. You are required to get paid-for financial advice if your transfer value is £30,000-plus, which is a longstanding safeguard against making mistakes you can’t take back later.

> Should you combine your pension pots? Read our full guide