Summary and Final Thoughts

You can't obviously you can't like combine a nice sort of pension with two separate eights, but um I know you know this by the way. Um I'm learning I'm learning to go on. Hi folks and welcome back to Meaningful Money. This is session six hundred and twenty three with me, Pete Matthew. And me, Roger Weeks. Looking forward to getting into this one, Roger. I am dying of hay fever, but I'll try not to sneeze and snort. Yes, please don't. Nobody needs that in their ear rolls while they're walking the dog in the morning. You won't be able to read your screen. Wipe wipe the screen while I uh so I could see it. How gross. But um we've got a lot to get in our teeth into. Yeah, definitely. Uh as we mentioned last week, we wanted to reply more det inail to a question we had about whether it's wise to consolidate pensions and investments and whether it's possible to go too far and oversimplify things. Very long question from Andrew, but he uh really was quite anti the idea. And as you can imagine, we've got views on this, and what we'll do is as we always do, we'll look at everything you need to know first and then everything you need to do, um, to help you come to a decision about what's best for you, because it is a very personal Yeah, and uh and I request please, if this is helpful, and hopefully it will be, uh do us a favor and leave a rating or review. Go to meaningful money. tv slash love where you can choose from various platforms to leave that review. Yeah, yeah. It's quite a cool little thing that I think I pay five bucks a month for it. But it's like a single page and you can click off to Spotify if that's your thing or Apple Podcasts and a couple of others as well. Five bucks. Five bucks. Five bucks. Yes, okay. Just uh yeah, sort of throwbacks to I guess Saturday evening TV when I was a kid watching A Team and all that. Five bucks. Um so yeah, meaningful money.tv slash love. Um but remember any notes and links that we talk about will be at the show notes meaningful money.tv slash session six two three So as Rog said we wanna we had this question from Andrew last week and it was really really long . Really, really, really long. But very detailed. And it was this this almost sort of visceral um response from Andrew about what he considers to be the prevailing wisdom, which is to consolidate uh pensions, investments, get it all as simple as possible, one platform. Um, and he really kind of militated against that, which is absolutely understandable. Um so let's look into everything that you need to know about consolidation, pros, cons , why, all that sort of stuff, and then uh we'll we'll get into what we need to do. But there is a lot to go through, so we're gonna take a bit of a view if we're sort of already 40 minutes in and we've only covered everything we need to do we might do it over two weeks. Okay, so just watch uh watch out for that. So I think the first thing to to mention is the sort of emotional psychological pull of consolidation . And I mean it used to be the case. You were in the same job for forty years, now I'd one pension, but that's not the case anymore, is it? No, back in the day I sound like an old man. You get a job when you do school or college or university or whatever, and you kept it for your lifetime. But now people change jobs. I mean, even in my lifetime, I changed jobs many times . Um and the problem is then you accumulate all this financial clutter. I know he said a different word then um from these various places you've worked and it could be a uh I say here it could be a pension there, could be another pension, there could be another pension there. Yeah. And those pensions are all different. They are and you know, set under different rules, and you know, I mean those of us who are those of us of a certain age, you know, we will have all kinds of different pensions and um yeah, like I say different rules, but also um different types, you know, D B, D C A V C's linked to D B skins. That's a lot of uh acronyms, isn't it? Um we I f see people who have different pensions linked to different advisors, even. Yeah. Which is a throwback to to when pensions were sold by advisors, it just was a product. Yeah, and and I I had a a client you know very well, um, who had me as one of his two advisors, which was a a little bit awkward in getting things done in knowing what you had to do. What's the other guy doing and stuff like that? Can I use up the CGT allowance this year computer allows to use? Yeah. Um and he had a range of ISIS and VCTs and investment bonds and pensions all over the place. Um and yeah, when when I had to advise him it's a case of let I I need to pull these apart 'cause they're not all the same. No. Yeah, he he would have a a literally a a drawer in his f a filing cabinet in his desk and say, Well, I got all these Rog. Yeah, right. You know, and suddenly it's like, hold on a minute. Yeah, it was millions, yeah. A lot of money. Um so different advisors maybe. You know, people open different accounts for different things. So like they might have an IC , you know, kids university savings or um you know big holiday when they first retire or whatever and you end up with different pots either just because you've chased better interest rates in cash ISA or you know back in the day before platforms, it's not that long ago, we're talking so late nineties, early two thousands, platforms became a thing. Um, do you remember financial um fund supermarkets they're called before the retrieved platforms? So you know, it you might have different accounts for different reasons. Uh you might have seen an advert for a particular fund and opened an ISA with the fund company rather than a platform. So, you know, there is there is reasons why people naturally uh accumulate stuff, but then there's an obvious attraction for having it in one place, isn't it? Yeah, the the appeal of seeing it all in one place, you can you know, and we'll talk about that in a minute, but it's it's I haven't got to go to that drawer for this, and I haven't got to go to that platform for that and I haven't got to that advisor for that reason. So it's it d the actual having it in one place is it like a I've got a overview of e everything I've got now and I know how to deal with it. Yeah. I think you know people some people are really good at kind of keeping on top of, you know, they'll have a like a master spreadsheet and they'll update you once a month, but a lot of people are not. Um I mean I've lost count of the number of times over the years of doing my job where you you know, clients forget they've got something. Oh, especially pensions. Yeah, right. Yeah, I've had a I've had a job in the past and I left it. Back in the day I said that twice now. I'm gonna stop saying that. Um but you used to um you your your pension was arranged by your employer. There was none of this auto enrollment and you had to pay in. No. So so some pensions were as were set up by employers and you didn't have to pay in. So it and then when you left that employer you just forgot that you had it. Yeah. And and I'll never forget my first day in this profession , I was taken to my first ever client of the CIS with my uh district manager, I think, or my auditor at the time, and to do a essentially a fact find, it was a sales thing, but a fact find on these clients and they they had a little one of those little miniature suitcases like Paddington has and um and in it was all their books and statements and stuff like that. And I remember them finding a book with fifteen thousand quid in it and them said, Oh, I've forgotten we had that. Yeah. And of course, me as a fairly newly married, largely skint person at the time, thinking, how do you forget you've got 15 grand in the bank account? But people do. We you know we all do as life gets busier and you know as we amass more and more of this stuff . And I think simplifying things has a sort of link to well-being and financial peace. I think complexity and um you know, sort of uh d disparate, diversif ied pots can actually weigh on you. Yeah. A little bit. And and peop people have have a lack of tolerance for these sorts of things as well. You know, it's like s some people got p some people can juggle that. I I know I've got that there and that there and that there. Yeah. Um but it's like I oh I that would drive me completely nuts. I wouldn't be Yeah. I think people overestimate how tolerant they are for complexity. They think they're better than they are sometimes. Yeah, obviously, not ever not everybody, but I think generally as a species, we feel like we can cope with more complexity than we actually can in reality. So there is a sort of emotional well-being pull towards consolidation and simplification, I think. I think that's the first thing to say. Now, what does consolidation actually mean? There's kind of different levels to it. So you know you could for instance, it it doesn't have to be consolidating all your accounts. You could just consolidate your pensions. You could just consolidate your investments. You could do that in two different platforms. Yeah, easy easily done. And and there is something to say, well, why would I com combine my ICEs and my pensions? Because they they're there for different reasons. You know, so it's just like,, yeah I I don't want to combine everything in one area 'cause 'cause I'd like to com compartmentalize my savings as as as opposed to my retirement planning. Yes, true. So there's a difference between sort of I mean you can't obviously you can't like combine a nice and a pension they're two separate things, but um I know you know this by the way. Um learn I'm learning as I go on. You know, but um y you know, it com bining pensions of a similar type, um, that's one thing. I think you um platforms shifting from one platform to the other, if you've got three different platforms that do largely the same thing at largely the same cost. Um platform consolidation is different from tidying up all pensions, I think. And it doesn't need to be about sort of changing the investment strategy. You don't have to have a single investment strategy across everything. So there's like I I feel like there's different levels and depths of of consolidation, not just bringing it all together, one platform, one investment approach. That's like like the the ultimate simplification. Yeah. There's the shades of grey above that. Yeah, and having one provider doesn't necessarily mean that you've got to have this one fund. Not anymore. I mean I mean you know Jen's got an ICER and within that ICE, she's got a fund for the girls. Yeah, there's there was a wedding fund. Yeah, sure. So because it makes it tax efficient for us and stuff like that. But in it you know, so although it's on one platform, we've got two separate funds that do separate jobs. Yeah, that makes sense. So the fact you're on one plat form doesn't mean you've got to forego the ability to separate these things in your mind. Yeah, it doesn't need to go so deep that it's it's sort of everything with one provider, one platform, one fund. That would be the ultimate sim plification. I mean I hear people talk about that though, you know, everything in like Vanguard Footy Global OCA. Um everything on the Vanguard platform or all on II or HL or H Bell or what any of these um and one pension one ICE. Certainly you could do that and for a lot of people there I think there's there's arguments for that. Um but there are arguments against as well, which we're gonna get into in a minute. So let's look at the arguments for consolidation first. What we got first on the clarity is the it's it's got to be the most obvious one really. It's easier to know what you own if it's all in one place, it's all consolidated, whether it's ISO and pension on the same platform. Yeah. If it's all in one area, you can see it, you can you can near enough touch it and and you know what you're doing. You know, uh that's in drawdown. That's my you know that's my that's my holiday fund or whatever. Yeah, yeah. So easier to know what you've got, easier to track performance if you care about that, which I know we all do to a degree, but some people track more closely than others, and it's more difficult to track performance as a whole and whether you're on track with your planning if you've got to monitor performance across different pots, I think. Although Andrew said last week he finds it easy. Yeah, why? Because I've I I've got that platform does that and that and they've got different funds doing different things. Well that if that floats your boat, Andrew, that's that's fine. You know, and that's not a problem at all. But what we're saying is if you had it all on one platform, it is easier to track your performance. Yeah. Performance of individual funds, individual pots and all that sort of stuff, it's easier, obviously if it's tidier. But you know, if you can cope with the complexity, then so be it. I think it's easier clarity gives you it's easier to know if you're on course. By that we mean sort of you know if we're reviewing for a client and we've got a plan in place for that client, you know. Let's say we did the original planning five years ago and we've updated it as we go. We can at least say, Well, actually, you are on pretty much on track for the plan as we kind of you're where we thought you would be at this point, broadly speaking. Subject to the vagaries of the market, of course. Um and it's easier to know that if you've got fewer pots to track. Yeah. All right. Uh and obviously less admin. Less paper. Yeah. If you get a tax voucher, you probably look at it online, I guess. But yeah, the the less admin you need to worry about. Yeah, exactly. And that i is the sort of the sort of next argument for consolidation, I think. And this is a sort of deeply human thing. If you've got less admin, you've got less paperwork, you've got a reduced kind of cognitive load. Yeah. And we all I think we all sort of deal with this differently. Of course we do, we're individuals. And I also think it changes as we age. I mean I'm seeing that even in my own dad now. He's 85, 86 in September. I mean, one of the most competent, capable human beings I've ever met in so many ways. And yet as he's you know, really in late age now, his cognitive ability, he's not losing it, but he's his sort of ability to cope with stuff is less now than it used to be. So if you've tidied things up, if you consolidate, it you will have fewer passwords to remember . You know, we should be using a password manager really for security, but you know, if you you know, if fewer things written down in your password book, please don't have a book that's marked passwords. It's really not safe. Um you know a few statements, two uh fewer you said tax documents, CTVs and stuff like that. And I think you're probably less likely to forget what you've got. Yeah, exactly. So reduce cognitive load is a is another one. Yeah, and and that and that's important these days is that you know yeah in order that you want to be be intentional with your your your finances you need to be able to cope with the the lo the load that comes through your door or online and and the emails you get. Yeah. You know? Yeah, yeah, yeah. It's important. Uh you know there's an argument for going easy on yourself cognitively. You know, I d uh talking to clients or new prospective clients, it's all like look , yeah. Our job is to kind of think about this stuff for you to a greater or lesser extent to to allow you to get on with planning and living, you know, enjoying life. I always say, look, the money's a means to an end. What's important is life, relationships, health, happiness, travel, all that sort of stuff. The money is there to support that. And I think it reducing your cognitive load is a gift to yourself um, so we'll get into a bit later, gift to your spouse, because very often there is an imbalance between spouses in terms of interest and ability when it comes to finance. So reducing the cognitive load, I think, is another reason. Uh another argument in favor of consolidation. What's next? Uh well from my side of the table it's gonna be better retirement planning. You know you've living this now. Sorry? You're living this now. Yeah ex actly. You know, so it's so it's eas eyasier to model your withdrawals if you've got all in one place, instead of I I got a I got a two D C pots over there and a D B pot over here and something in the middle, like it's an A V C or an F S A V C or whatever here. How the hell do I deal with that? So it's if it's in one place, I know okay, I could take that much tax free cash and I could trigger that much income without worrying about especially when you've now got the euro lifetime limit on your tax free cash. Yes. If you've got various parts. I mean the the pension providers won't keep an eye on that for you. No, I know. It's the responsibility of the pension. Yeah, so you you need to make sure that you've got it and that having it in one place just makes that process far, far easy. It does. I mean practically so thinking of me, you know, doing my job. So when we take on a client, the client builds their profile on our portal. So they're putting in all their different ports. Some clients have got nine different pensions. Okay. And that gets added into their voyant plan by the power plans in the office. So the starting point , we call it a base plan, um is reflects their actual position with all their different pots. Yeah. But the first thing I do when I come to that, so the power planners have have kind of loaded it all up and I'm looking at their current situation. First thing I do is unless because the power plans will also have looked to see if there's any kind of special things as we'll get to later on those pensions say, first thing I will do is create a planning, uh, a uh copy of that and then coordinate and just put, you know, Mr Consolidated Pensions and just have a single pot. Oh, okay. All right. Yeah. And then same for partner, just a single pension pot . If they've got six different stocks and shares ICEs, I'll create a duplicate and just an ICE. A single stocks and chairs ISA. Because it allows me to then say, right, okay, what if we fully crystallized all of them? Yeah. And I'd have to go in six times to six different pensions to model a crystallization. So it's so much easier. Modeling and planning should be bigger picture stuff. So if you're in the academy, meaning for academy.com uh slash retirement plan Use the coupon code YouTube or podcast either way to get a discount. Then you get access to Voyance. So this is what I would teach you to do as well is sort of simplify. You can then say, okay, it's a lot easier to to model cryst allisation, uh off plus withdrawals, all this sort of stuff and see the impact of them rather than having to say, Well actually I want to draw that pension first. Yeah. Why? Because it's bigger. Okay, that's not reason to do it. Or or whate ver. It's easier to assess I think risk. We talk a lot about cash flow ladders here. I think it's easier to sort of get that right with fewer pots. It's definitely easier to coordinate uh and to understand the tax implications and strategy. Yeah. Um and then it's a lot easier if you're no longer around. Well, yeah, that and that's that's always the the problem with this, is that you end up with pots everywhere and you you you need a a one I die file to leave to your spouse to to deal with it all. It's like, well you got you got nine providers there to contact or your executor has yeah and suddenly that's that's that is that a mindfield you want to drop on them at a very time when they're possibly a little bit upset anyway. You know? And and say, Well actually, wouldn't it be handy if it was combined in one place because you only have one, maybe two places to go to? Yeah. That's where my investment sorry, that's where my pension is. You got uh two two two prongs to the fork rather than nine in the moment. Yeah, for sure. So that'd be a very big fork. Nine pronged fork. That's a big piece of toast in the the fire. So far we've got arguments in favour of consolidation, clarity, reduced cognitive load, and better and easier retirement planning. Um what's next? Cost savings. Potentially at least. Yeah, potentially. Yeah. So so you've probably got a if you've got a range of pension funds, uh pension plans, they probably have a different charging structure. The ones you had from the nineteen eighties would be different to the ones you have for the year two thousand. Often more expensive. Yeah. Yeah. Um so there there's there's there's ways and means then of actually if I consolidate those, which ones are costly for me and are they doing the job? Yep. Um we'll talk about other things you need to be to be careful of in that in that in a minute for you. Um I think if you obviously if you have more money on one platform, some platforms tear down. Yeah. So you don't get more than half a million quid, you get a you know, a lower platform rate, or you get a cap. So if you're on Vanguard, say, um then there's a cap. I think it's over about a quarter of a million. Um so you know you've got more than that, then everything above that is free. Whereas if you had less than that, because you've got multiple pots, then that's a factor as well. Um there is quite often uh there's a possibility, I think, to duplicate fees. So let's say you were you had three different pensions with three different providers and you were just taking drawdown out of all of them, chances are every one of those providers got an 100%. Exactly. And that's very often a fixed amount. Yes. Potentially. Yeah. Which is just wasting really. Yeah. So you know again, potential cost savings, these are all sort of reasons to consider consolidation. What about investing? Yeah, uh well having everything in one place or very close to one place, um it it would give you a decision uh uh process for um in your investments a b a better chance. Yeah. You know, it's is it harder to accidentally overlap f funds. You know the time. Yeah. You got I I got that fund over there and that fund over there. Hold on. Do you realise how much you've got in America or yes . Japan or whatever, you know, it's Yeah. It's it's it's easier to lose track uh and to kind of it's easier to maintain good discipline and asset allocation, I think, if it's more visible um as opposed to right okay now I've got to create a spreadsheet, I've got to kinda download the list of ten funds on each of four different platforms or whatever and then work out am I broadly you know where I need to be in terms of asset allocation, so much easier on a single platform. Very often that'll be one report. Yeah. You know, here is your current asset allocation. Um not impossible, but easier, right? And some people would be more up for that than others. Yeah. And then that leads you down naturally then to okay, you've got to rebalance your portfolio every six months, twelve months or whatever. Or whatever, yeah. And it's like, you know, oh what what am I gonna do here? I've got to have to rebalance that one and how do I do you know, and and how does that affect that one? Because I need to Yeah especially you if've got doing different jobs as well. So it's um I won't want to do that, Matt. No, no. I just press a button. If you've got to do it across multiple platforms and pots. Yeah, okay. So better investment discipline is another reason potentially to consolidate. Um and I think the last sort of argument in favor of consolidation is probably we've alluded to already, simplifying uh estate planning. All right ? So your beneficiaries can find stuff more easily. You know, it's if you're organized, right? Then that's gonna help them anyway. One of the best legacies you can leave your family is tidy financial affairs, literally, you know, physical tidiness in a filing cabinet somewhere. But also not unnecessarily complex. So, you know, your beneficiary is gonna be able to find stuff. Really importantly, executors are less likely to miss assets. You don't want, you know, uh the submission to HMRC, you know, and the sort of application for probate to have to be redone because they miss something. Something's come out of the woodwork, see that often as well. Oh, we didn't know they had that. Well that that's the problem because we don't talk about our money to our family generally. As a j as a general gener gener alization obviously, but we don't and then your your executor comes along, right, oh let's let's see what they've got. And uh unless you know where to look, you don't know what they've got. And it's it'd be so easy to trip over something and and it's always an extra ten grand there. Yeah, or an extra hundred grand. Yeah. You know, the last thing you want is fines and charges or whatever. And when it comes to pensions, of course, uh expressions of wish is obviously it's not part of your estate. Still not going to be part of your estate after twenty twenty seven, really importantly. Right. We've mentioned that before. Uh included in the calculation of inheritance tax, but not part of your state, so still subject to an expression of wish, still subject to a master trust to pensions for the most part. Yeah, and you may have an old expression of wish on one pension plan. Yeah that you've done a different expression of wish because it's a newer one on a on a separate one yeah and hadn't for hadn't remembered that I actually I've I've changed my expression of wishes. Yeah so I never got one that's fine. I'll leave that there. It's like, well, is it does it still do the job? Does it still reflect your conversation? Yeah, really important. You know, if you've like got married or divorced, or you've had another children. Uh an another children. Another children. Yeah. Singular plural. Yeah, if you've had another child. All those childs. You know things consolidated makes that a lot easier to manage. So just a reminder, these are our sort of strongest arguments, I think, for consolidation. Clarity , easier to own to know what you own and track performance, all that sort of stuff. Reduced cognitive load, fewer passwords, less paperwork. Easier and better retirement planning. So scenario modeling with,drawal strategies, tax planning, all that sort of stuff. Cost savings, you might uh have a lower charging tier if you've got more on a single platform. Uh, easy to manage your investments and maintain good investment discipl discipline, rebalancing asset allocation, all that sort of stuff. And easier, I think, when it comes to those left behind after you've gone. Those are all, I think, arguments in favour of consolidation. But in the interest of balance , I think we need to look at what you know, arguments against consolidation. Starting I think with the classic. Yeah. Uh uh I don't want all my eggs in one basket. It's it's it's it's the big one we come across all the time. Of course we do. Um so and it's that emotional fear that people have which actually may not be justified compared to the actual risk that's attached to these things, you know? Yeah. It's I had conversation only this week with a prospective client and it's like, well and you know they're valid questions. If you're gonna stick everything on one platform, and I think Andrew was asking this last week, what happens if that platform fails? And then we need to be really clear. I mean, first of all, it's unlikely, but not impossible. And you know, I've you know advised through the great financial crisis where you know sort of century-old staples of the personal finance system like Brethren Bing ley, Northern Rock, these companies failed, you know, and uh AIG, remember, biggest investment company on the planet essentially failed in the great financial crisis. So it's not beyond the realms of possibility . Um, but then we need to, if we can, you know, answer just how big of a risk is it? And if it's too big a risk for us to bear, then are we prepared to pay the price for that, which is increased complexity. Yeah, which is what Andrew was saying last week. Yeah. If I'm happy to take this additional risk on my on my shoulders, is that okay? It's fine it's fine. Yeah it is. And if you're not then you need to understand that it you're gonna have more complex affairs and it's gonna take more running and that's okay. Um so yeah, you're right. We need to sort of distinguish between the sort of our emo emotional visceral response to something that may or may not happen and is actually unlikely to happen, versus the actual risk of it. So and the problem is I think these days it was a lot easier, right? When your pension was with like Scottish Widows and you were in the Scottish Widows Fund. Yeah. And if it's we've talked about the distinction before between insured pensions and now pretty much everything is platform. Platform now pensions. Back in the day, you know, if you had a Scottish Widows pension, it was covered to hundred percent with the FSCS because it was an insurance. It was a contract of long-term insurance, really. Now it's not, it's platforms. You've got all right, who's looking after the money exactly? You've got the platform itself and the nominee, are those actually two different people? The money's held with the nominee. You know, they're the ones that kind of actually hold the funds for you. That may or may not be the same company as your actual platform, which is basically just the admin system. You know, if you hold funds, which most of us do, how many different providers? And is the fund provider likely to go bust? If so, what happens then? You know, and yeah, a nominee custodian. It it's hard to know. It is hard. And and even for us sometimes it's hard to dig down and say exactly what happens if Exactly and and and there's always this emotional thing around the around the back of it. No matter how much you try to explain these things sometimes, but the the FSCS, like you said, is is has has changed things compared to insured uh pensions these days investments. Yeah, yeah. So I mean it's eighty-five grand. But it's like, you know, per person per provider. Provider. But what constitutes the provider? Yeah. Is it the platform? Is it a fund manager? You know, you need to kind of dig down and understand this where you can. I mean one thing I always say to clients, I said it to this this client this week, I think here in the UK, because of the CAS rules, CAS stands for client assets source book, um, so basically the regulator rules about separation of client assets from provider money. So like if you're on Hargoy's Landsdown or whatever, Argo's Lands down can't dip into your pension to make payroll. No. Right? They've got to keep the lights on. They've got to keep their money separate from yours. And they have to audit an account to the penny for how many shares in every fund every client owns at the close of play every day. To the penny, right? There's there can't be any grey area. And you know, we've had um experiences where platforms that we've used there's been a bit of a glitch overnight and it's almost like right there's no trading. Yeah. No trading until we sort it because we've got to sort of reallocate. Just make sure it's all audited and correct and that happens over a couple of hours. And then, you know and it's like okay, right, we can trade again now. And you know, i it's I think understanding the fact that I think in this country we have better protections than in any other country on earth. Well when you look at the there was this very famous um investment manager worked for a particular company, uh Neil Woodford, and he went on his own, set up his own company and his own platform and introduced his own funds. And a lot of people, because he was such a star at that point, migrated money to him or new money to him and it was going brilliantly. Uh then the funds actually didn't do what they expected to do and the uh regulator stepped in and said, right, you've got to stop trading on those. People were worried about the money. Well, actually, in the end, the funds were transferred to another provider to look after it off his platform. Yeah. So although he being the star and he introduced the funds, they were held separately to him. He couldn't actually dip into it to pay for the debts that were going on and we're not going to definitely no in his case yeah he was buying illiquid stuff and that was a problem there and then those weren't performing as well as they thought and people started to get concerned, and then there was like, okay, we can't give you money for a week or a month or whatever. More and more people get concerned, and then it becomes a run. And actually, I believe I I need I would need to check, but I think investors in that fund have had pretty much everything back. There's not been massive losses, I don't think, but there has been freeze. Yes, and it's and it's taken some time. So it's like Andrew said, well if I if I had just one platform and it got frozen for a week and I wanted my withdrawals to come out. Yeah, we how do how do we do it? What if it was six months? What if it was five years? Exactly. You know, that's a clear argument against consolidation. As good as our rules and protections are , having all your eggs in one basket is a big deal. Yeah, it is. We're about halfway through what people need to know. We're thirty one minutes in roughly. So I think we're definitely gonna be attacking. Yeah, yeah. Okay, so all your eggs in one basket. That's the obvious the first one that everybody says. Against consolidation. Um we talk about a lot when we're talking about tidying Yeah, and especially because you've got old plans that you had back in the nineteen eighties or nineties. Particularly pensions, isn't it? Yeah, pensions had these old rules which were changed to simplification, which wasn't simplification because some of the old terms were kept in. Um so some pensions you got will allow certain things. You could have a protected pension age of fifty-five, so yeah. Although the pension age is then moving to fifty-seven, you could still exit it for 55. Stay tuned for a video on that. Right. In fact, it'll have come out by the time this episode comes out. Wow, and I didn't even know that's a great link. I didn't know that. Well, we finally had confirmation of what will happen. Oh, we have. So this was announced. So ch theange to the normal minimum minimum pension age was announced in November twenty twenty one. Yeah. And since then of people going in, what if I'm fifty-six on the you know, when it goes up and I've already started drawing, could do I does it stop? And I have to wait until I'm fifty seven Watch this space. Yeah, well, watch the video which uh we'll stick a link in the description to that. So yeah, anyway, let's not get sidetracked. So loss of valuable benefits. You said uh protective pension age. Protective pension age. Guaranteed annuity rates is a big one on older pensions. Yeah, because they were I mean some of them were. I mean they're written into the contract. It's like you know at A65, you've got an eleven point one percent annuity. and you uh the problem is these pensions were set up back in the back in the day. That's the third time I'm not saying anymore. Um and it was it was set up and and it was one of those quirks you didn't. You uh I'll pay in a certain percentage of my salary and it'll go into this fund, and when I get to sixty-five generally, it'll pay out. Well, there was nothing to say that you realize what the annuity rate was, because it was just part of the paperwork you signed at the time. But we have people coming to us and six uh say sixty-five, you get an eleven and a half percent annuity rate. He's like, don't you dare lose that. No, that's properly valuable. Sometimes there's like annoying caveats, like it's gotta be single life and it's paid like annually in arrears, so you don't get anything for the first year. But you know, even so, as part of planning, you've got to say, well, actually there's gotta be very, very good reasons to shift to give away such a great guaranteed benefit. Uh protected tax free cash, some old plans. I mean, they're a pain to um you know like, oh, y yeses,, it in's the real pain to cal culate. It's like you ask the clients, have you got your pay slips from nineteen eighty-seven? Why not? I wouldn't have I wouldn't have you know, I wouldn't have payslips that long ago. Um but protected tax free cash, you know, we've seen clients with half sixty, seventy percent of their fund available to be taken as tax free cash under the old rules. You transfer that away, you lose it. Consolidate, you lose it. Um D B transfers and go sort of tiptoe around that. Yeah. Uh ten, eleven, twelve years ago when the government changed the rules on what you could do with your pension and suddenly you could actually take this money, or your DB pension scheme had a value. Well technically it didn't. But suddenly you could transfer these things. But but they Yeah, you can still transfer them if you find an advisor willing to do so and it means it's the right thing to do for you. It all depends upon the background assets you got and what other things you got in the background. Um but you can say I I just want to transfer it 'cause because I want Yeah, I mean it was triggered as you like you say by uh pension freedoms. I mean in a sense you've always been able to transfer D B skins, but nobody ever did because it wasn't really there wasn't really a lot of point. But once you were able to leave your pot to your family, even you know, to your children, your D B transfer stops with your spouse, doesn't it? If you die first, pays lesser amount to your spouse and then it stops altogether. Whereas and and of course at the same time, transfer values were massively inflated. Huge. Yeah. I mean my best example was a client still a client today who was um air traffic control ler and every month it would update his transfer value on the login, so on on his pension scheme. And and one month it was eight hundred, the next it was one point three five million. Literally a month later, it was all around the Brexit thing. Goodness me. So after the Brexit referendum, yeah, the um transfer value jumped by in in this case in that case five hundred and fifty grand I think. And so and you know, if suddenly you can I mean that's that'll win the lottery. Instead of a guaranteed income, you've now got a pot of one point three five million In that it was the nearest I've ever seen to a no-brainer in that case, actually, but we're never allowed to use that comes to DB transfers. But look , uh DB transfers tightened up, rightly so. There was some terrible advice given, you know, the poor uh members of the British Steel pension scheme just being ripped off en masse, really. So you know, while you've always been able to transfer D B schemes, it's been a lot more popular sort of twenty fifteen to twenty twenty, roughly. You can still do it, but as Rod said it's hard to do. But uh our our default is always it's rarely worth it and your default starting point should be don't transfer. Uh we don't even talk about it with clients, we don't even have the permissions to do it because we just like we think it's such a bad idea. Um and yeah I suppose it is worth mentioning 'cause we mentioned charges in the other stuff that you can actually get some really good charging structures. Yeah, you can do. I had a client come to us with half a million quid uh in a Zurich pension and he said oh the charging s is uh zero point zero two per per cent per year. And I said, No, it's not. It's ridiculous. I've never seen and it was. So how could they make money out of that? We were they just paid us out thirteen quid a month on half a million quid. It was just like okay. There has to be very good reasons. Yeah, we're not going to be moving that one. Well thing is we have because there was a little flexibility for retirement take draw now. Right. So it's just like ah but I said, you know, we'll leave it as long as possible because those challenges are amazing. So you you know, um arguments against consolidation, eggs in one basket, right? All the issues that come with that, you may lose valuable benefits. Um, I think it's you know some of the things that I think Andrew alluded to in his question last week. Um operational risks. We've mentioned, you know, what if the platform has a massive glitch or is hacked or whatever. Um , you know, there are still humans involved in this, and so you get admin errors, transfers. I mean, you've had you've been transferring a pension recently for yourself, yeah. It's gone really well. Yes. But it doesn't always happen. We've got another transfer I'm thinking of for a client. One fund, we've done it in specie, one fund has taken about three months. Um nobody can understand why it just is taking its time. It's like a really slow fund. Yeah. As it's walking from one platform to another, it's a limp. And I I cast my mind back to you know some of these old older traditional pension providers where you had insurers' pensions and you wanna try transfer them and it's like oh you've got to sign this bit of paper and we've got to send it across to there and then they're by post and they and they've gotta contact the new provider and they've got to sign it to make surere that they' a real pension provider and then it's got to go back again before they transfer the money and it's like well they then gotta liquidate the funds into cash because you couldn't transfer the same speech. So there is operational risk in tidying, transfer delays, uh you know losing histor ical paperwork. So for instance, you know, if you had an old pension and maybe you did a crystallization and then you shift it and then you butt up against some allowance or whatever new rules and you think actually how much did I cry ? Yeah. And you didn't keep records and now your account is closed with the old provider. So there's there is oper ational risks in tidying sometimes, uh, particularly if you're losing sort of historical stuff. Exit penalties, maybe in some. Yeah. Um and of course if you are tid ying, you lose diversification by definition. Consolidation is almost the opposite of diversification. Um, and so you you do increase platform and provider risk. And some people ally um enjoy or value that sort of redundancy and diversification. Uh, and I get it. Yeah. And and big time these days is cybersecurity concerns as well. Yeah, if it's if it's all w in one place and somebody hacks into it or something goes wrong. Yeah. Yeah, uh I I I'm I'm up a gum tree without a paddle. Glorious mixed metaphor. Up a gum tree without a paddle. What use is a paddle up a gum tree. Well you might be fight fighting a tiger that's trying to have to you just never know these days. We'll torture the metaphor as much as we can. Um service quality, you know, we've had platforms where services have really gone downhill. They've got bigger, not hired enough people quick enough. You know, you're waiting on service calls for half an hour at a time and then not getting the answer because somebody's following a script and they don't really know what they're doing. So, you know, having more than one platform might sort of reduce that. One thing that Andrew did say in his question, he talked about uh you know tracking performance and and what we said last week was you know, it's not uh performance is not to do with the pension or the platform, that's to do with the underlying funds. But of course if we're talking about fund diversification then yes, performance uh can be um spread against across providers as well. I think there are some sort of behavioural reasons or arguments against consolidating too. Uh again, very individual, but it might be the case that you know if you've got pots all over the place, that actually puts a barrier between you and spending or overspending. Right? You know, if you if you have to think, okay, I've got three different pens ions I'm not sure which to take I I can't really be bothered. Yes yeah that might help you keep your spending in check but I I do wonder whether spending less is a good thing where it's really about spending money. But you know , that sort of friction may actually help some people guard their spending. And I think sometimes having to mentally account for things , having to kind of hold complexity, whether it's in your mind or in a spreadsheet or whatever, that can actually help you because you're thinking about it more, it can help you guard your behavior more. So you're less likely to knee-jerk react to something or dip in really quickly because it's more difficult to do so. That sort of mental accounting can I think sometimes help um uh measure our behaviour. Yeah. And but but actually if you've if you've got in your mind your money for different purposes as well, actually I don't want to consolidate then because in my head I know that's for that purpose and that's for that purpose. So I've got a I've got a fund which is for my retirement. Yes. And that could be a pension or it could be your ISIS because they're yes these days you may be you may you may you may be taking money out of your pensions, you know, taking your tax rate cash and some income up to the the basic rate threshold and shoving that in ICEs over the over the time. So actually, although I've got an ICE, that's my retirement pot as well. Yeah. And you could have more than one, you could have your retirement ISO pot, and you could have given to the kids ISO pot. Yeah. You know, so two different ICEs and it might help you. I know a lot of people who y you know, we talk about well, you could just segregate that with funds. You talked about Jen having a fund inside her ISA , which is kind of the girls fund. you have and she has kind of segmented that by choosing a different fund. But some people were I know I want a different ISA for that. I want a different account. And in my book, it's like that account number is for the kids or whatever. So maybe that's an argument against consolidating. It's a sort of behavioural thing. Kind of right that's almost back to Dave Ramsey's sort of um pots or the old envelope system for accounting. It's like, right, I I get paid. That money's for the electric, that money's for the rent and the mortgage or whatever. And it's the same for investment and spending at the other end. Um, ultimately, everybody here is unique. Everybody listen to this is unique. Andrew clearly, in asking his question, couldn't get his head around why somebody would do something. But the next person might not be able to get their head around why he would think like he thinks. No, exactly. And and and the general r our side of the table and from the industry, it's like, well, actually consolidation is a good thing to do because it does all these things. But on the on the on the flip side, as Andrew said, but actually you lose XYZ by doing that and wouldn't it be handy to keep hold of Yes, totally. So we've got a few arguments against consolidation. All your eggs in one basket, potential loss of valuable benefits in older schemes, sort of operational risk trans,fer problem s, admin errors, lots of, you know, losing historical paperwork. Um you get sort of diversification of risk if you've got more than one platform provider, fund, all that sort of stuff. That's really, really important. And there are some behavioural reasons why having things a bit more complex may be helpful. Separate ports for separate purposes, making frivolous spending or knee-jerk uh decisions more difficult because there's more complexity and more friction. So we got three more bits to cover and then we're definitely doing this for a break for five minutes then. Three quarters of an hour in and we're st yeah and still not finished with what you need to know. Look , the fifth thing you need to know any kind of structure here. Um , when might consolidation be a very, very good idea? What sort of people and situations let's rapid fire this. If you've got loads of small deferred workplace pensions, you've got yo, five thousand here and three thousand there and two thousand pounds there, why th why are they sitting here? There's no benefit at all than having little dinky pots sitting somewhere else, you know? Carry out that with the small pots rules, but we'll get to that. But yes, generally speaking, that no reason to do that really. Particularly if there's no safeguarded benefits. So if there is you know no reasons to keep those pensions where they are, we'll talk about safeguarded benef its a bit later or t next week yeah um then that's reason to to uh consolidate I would think yeah and if you've got uh plans that got high charges yeah you know the less money that gets taken out for somebody else to take it out of your pot and you keep more of it in is a really good reason to go for sure. Yeah. Uh either bad or limited investment options in whatever old plans you're in, you know, some of the you might be an old with profits thing, right? Just like an archaic investment structure from Victorian times. Um, served a lot of people very well over the years, actually. But you know, if you are interested in investment and if like us you believe in sort of asset class, passive investing, all that sort of stuff, that might not be an option. So either poor or limited investment options where you are, that might be a reason to consolidate. And the fact that nobody would know where everything is, if you've got bits of paper all over the place, you know, i if it's in one place, they g they only they only do it at that one place. Yeah, exactly. I think if you're approaching retirement, that's a reason to consider it. You know, if if it doesn't really matter that much while you're accumulating, although that's not a very intentional approach. Um, but I think particularly when you're approaching retirement, it's an opportunity to take stock and tidy where possible. Yeah, and whether your survivor spouse and or your executors would struggle to manage the complexity of everything you've got around the back. Yeah, so know your family and know your who executors. How are they wired? Is your wife, is your husband, likely to just flounder with the complexity that you've got uh uh at the minute? You might be able to cope with it, but if they couldn't that, would be an argument in favor of uh consolidation, I think. Actually, I've got another example which just popped into my head. Uh-huh. Uh I remember I had a client uh had a pension scheme, uh, and it had grown really, really well. But when we looked at the nuts and bolts behind it, the death benefit was return of premiums plus interest. Wow. You know, and the f it it was worth something like ninety thousand pounds . Um and he'd only paid in like two and a half thousand pounds. And just like well, actually, despite the fact that you know it's a it's a decent sized pot, we ought to move this because if if you turned your toes up. You're only gonna get like four and a half grand out. Yeah. So so there's a good reason to do that. So there are things in behind the scenes that you know Yeah, exactly. So there's yeah, reasons to shift it. Flip side of that, when might caution be essential? We've talked about DB schemes. It's like the ultimate, like you just don't do it. There has to be very, very good reasons and you have to find somebody willing to advise you on it. Right. So generally speaking, if you've got DB pension, severe caution, if not just forget about consolidation there. Uh old pensions from the eighties and nineties, because they probably will come with some sort of benefits. Yeah. Could be guaranteed annuities, could be low chat low charging structures. Yeah. Could be get guaranteed interest rate return on cash for holdings. Yeah, exactly. Yeah. Guaranteed returns, guaranteed nudity rates are loads of things. Yeah, employer schemes, you know, uh you got employers, especially these days with auto enrollment, they will have negotiated possibly really good terms with the provider. Uh we find some that well yeah you you have your normal charges but they give you a discount of half percent of whatever because the provider has a a company paying into a pension for five hundred employees, you've already got a very good rate. So if you moved away you'd lose that employer discount possibility. Yeah, potentially. And I mean it's like certainly wouldn't consolidate and move away from an employer scheme if it's your current scheme and they're paying into it, would you? No. Um and if you you know if you've got a lot of money, if you've got a big portfolio , provide the diversification might weigh more heavily on you, I think. So you know if it's a really big pot, shoving it all onto one provider might just give you pause. Okay. And then I think the last thing you need to know before we summarise is that it's not all or nothing . You know, you don't necessarily need to stick it all with one provider. Maybe what you have one platform for your pensions and one for your ISIS. Yeah. Emergency fund in the bank. You know, or one platform for spouse and one uh you know, for one spouse and one platform for another. Yeah. And we've had that in the past with the with the husband and wife. So they keep them separately and say, Oh, mine's done this this year and mine's done that this year. But yeah, y you can have simplicity without uh absolutism. You know, you could you can you can simplify stuff without actually going to the nth degree and being too anal with the whole thing. Definitely right. Nice choice of word. It's a proper phrase. It is. Yeah, it's fine. Don't worry, we'll leave it in. Organized enough, I think, is a perfectly valid goal. It doesn't have to be sort of to the nth degree, as you say. So we've covered actually seven things in a ridiculous amount of time and what you need to know about consolidation. There is an emotional pull towards consolidation . Um we talked about what it actually means, tidying up platforms, funds, different kinds of pots. We've talked about a bunch of arguments for and against consolidation. When it's a good idea and when it might not be, when you should exercise caution . And just a reminder that good enough is okay. Right? We are over fifty minutes in. So let me just summarise here. Complexity can be worn as a badge of honor. I see it with prospective clients all the time. I also see it with advisors all the time. Complexity can masquerade as sophistication, but that's not true. Sophisti uh simplicity is actually a form of s of sophistication itself. We believe that wealth management should become simpler over time and not more complicated. Even though retirement is arguably the most complex time for your finances, I think it's an opportunity to simplify. Remember, the reason for money, the purpose of it is to support your life . It's not to become a hobby in and of itself. If that's your thing, then fill your boots, right? But for most people, they don't want to spend their retirement, you know, surfing, walking in the mountains, going off in their camper van and managing their portfolio. Some do, most don't. And I think we've got to always come back to it. If I died tomorrow, could my partner pick up without being completely freaked out by the complexity? Mm-hmm. Have I left it in such a way that is easy for them to pick up and run with? We're definitely gonna call it a day there. All right. So I think so. Yeah, else you know, because I need the loop apart from it. I've been talking for an hour. Um so look, this is meanformoney.tv slash session Leave any questions or comments there if you want to. We're gonna pick up next week with what you need to do. We'll very quickly summarise the sort of uh what you need to know, but then go straight into what you need to do next week. I think it's an important subject. It's important to sort of give it time uh and depth. But if you've got any questions, you can also email us hello at meaningful money.tv and just uh ask us any questions and uh we'll pick them up obviously in a future QA epis ode. But I think that's it for this time. So thank you very much, Rog. Thanks, Pete. It was it was a big one, wasn't it? But but actually in the scheme of things, Andrew asking his question has actually thrown out something that's really, really important. Yeah, definitely, and worth putting the time to. But we will see you next time.