The rise of the job hoppers: Millennials could each have five pensions on average as employer switches become more common

Writer,

Archived article

Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

While Baby Boomers born post-World War II might have had only one or two employers in their career – potentially offering generous guaranteed defined benefit (DB) pensions – the younger workforce is increasingly transient.

In fact, the average Millennial – who might be less than halfway through their career - is likely to have changed employer five times already*.

With further job changes inevitable over the coming decades as careers progress, the average number of jobs younger people have throughout their working lives is set to hit double figures.

Given automatic enrolment requires employers to offer a workplace pension to all eligible employees, it is increasingly likely people will have retirement pots scattered across various providers.

Pensions Dashboards should eventually make life easier by allowing savers to view all their pensions in one place, online. However, it will still be up to individuals to take the bull by the horns and combine their pensions with a single provider.

How to switch to a new provider

The good news is that, in most cases, switching to a new provider should be fairly straightforward.

You can open a SIPP online in as little as 10 minutes and, once you’ve done that, all you’ll need to do is enter the details of the scheme or schemes you want to transfer. The provider you are moving your money to should then do all the legwork.

If you’re having trouble tracking down your old pension, the Government’s free Pension Tracing Service may be able to help. Visit www.gov.uk/find-lost-pension or call 0345 6002 537 for more information.

Five reasons for savers to consolidate their pensions

1. Easier to manage

There are plenty of good reasons to consolidate your pensions but only 15% of people have done this.

Of those who have combined their retirement pots, the vast majority (61%) said the primary reason was ease of management.

This is no surprise as managing lots of pensions with different providers and different online log-ins is, frankly, a bit of a nightmare.

2. Lower charges

There are other benefits to consolidating, particularly if you have money saved in older pensions which tend to have higher charges. Savers could cut their charges and boost their pensions – potentially significantly – by switching to a modern, lower-cost provider. The impact of this can be huge over the long-term.

Take someone with a £50,000 pension pot who pays 1.5% in total charges and enjoys 4% investment growth per year. After 30 years, their fund could be worth around £105,000.

If instead they had paid 0.5% in charges and enjoyed the same 4% growth, their fund could be worth £140,000 – a third more.

3. Retirement income flexibility

Reforms introduced in 2015 mean savers have total flexibility over how they access their retirement pot from age 55 (57 from 6 April 2028).

As well as still being able to buy an annuity from an insurance company, savers can take ad-hoc lump sums directly from their pot or drip-feed an income using drawdown.

The majority of people who take a retirement income now choose to keep their money invested in drawdown – but some pension schemes still don’t offer this income option.

Switching to a new provider that offers flexible income options can allow you to build a retirement plan that suits your lifestyle.

4. More investment choice

One of the benefits of SIPPs is they allow savers and retirees to build an investment strategy tailored to their needs and appetite for risk.

This often includes a choice of thousands of individual funds and stocks, as well as simpler risk-rated multi-asset funds for those who don’t want to pick and choose funds or stocks themselves.

Some pension schemes only offer a very limited selection of in-house funds, however, restricting people’s ability to pick-and-choose the best value investments for their circumstances. Switching can therefore open up a world of choice and opportunity.

5. Better service

Rip-off charges aren’t the only problem with legacy pensions – service levels are also often extremely poor.

Modern platforms, on the other hand, can offer you 24/7 access to your pension via online functionality and mobile apps.

They also increasingly provide a wealth of information and articles designed to help you navigate your options both when saving for retirement and when you’re ready to start taking an income.

Find out more about our SIPP

Moving-your-pension checklist

Before you move a pension, it's important to make sure you won't lose money, or any valuable benefits by doing so. Here is everything you should check:

  • If you transfer out, will you be charged an exit penalty or face a market-value adjustment (MVA)?
  • Will you lose any valuable benefits? Examples include a guaranteed annuity rate, the right to take more than 25% of your fund tax free, or a pension paid to your spouse when you die.
  • Does your employer pay into your existing pension, and if so, will they pay into a SIPP?
  • Does your existing pension already let you access the investments you want? How do its costs compare to those of a SIPP?
  • Do you have a final salary (also known as 'defined benefit') pension, which guarantees a lifelong retirement income? If so, you’re probably better off not switching. If you aren’t sure, check with a suitably qualified financial adviser.

*Survey by Opinium for AJ Bell of 2,000 UK adults between 8-11 February 2022

How you're taxed will depend on your circumstances, and tax rules can change. Pension rules apply. Before you transfer a pension, check with your current provider that you won't lose any money or valuable benefits. These articles are for information purposes only and are not a personal recommendation or advice.


ajbell_Tom_Selby's picture
Written by:
Tom Selby

Tom Selby is a multi-award-winning former financial journalist, specialising in pensions and retirement issues. He spent almost six years at a leading adviser trade magazine, initially as Pensions Reporter before becoming Head of News in 2014. Tom joined AJ Bell as Senior Analyst in April 2016. He has a degree in Economics from Newcastle University.


Related content