The guide: Moving pension benefits may be a wise move - but it's not a decision to take in a hurry

Worried that your current pension investments may not provide sufficient income in retirement? One option is to consider moving your money to an alternative plan or investment fund. But there are several issues to think about first, including cost, investment risk and early exit charges. Richard Johnston, a chartered financial adviser with Murray Asset Management, outlines what to look out for when moving pension benefits.

1 Fund switching

Anyone considering a change because of poor performance should understand that this is most likely due to the investment fund in which pension contributions are invested rather than the plan itself. So consider what alternative funds are available within the current plan (most pension companies don't charge for internal fund switches). Some older pension plans may only offer a few funds, whereas newer plans may offer hundreds to choose from.

2 Exit costs

Check whether the "transfer" value of the plan is lower than the current/fund value. Should the transfer value be lower, an exit charge may be levied upon transfer, but note that the new plan may have lower annual charges. In this case, you may be able to recoup the exit charge over subsequent years and then start to build a bigger fund than the original plan might have provided.

3 Market value reductions

These charges are specific to with-profits funds and can be levied upon transfer to another plan or upon switching funds within the same plan (early exit charges tend only to apply to transfers away from the plan). Again, charges should not in themselves put you off a transfer/fund switch, but the wider circumstances should be examined in more detail.

4 Providers' own funds

The charges associated with a pension provider's own fund range are usually much lower than those offered by an external fund manager linked to the plan. Some bias should, therefore, be shown towards these funds, but what really matters is the net performance of a plan (i.e. the amount earned by the plan after charges). Cheapest isn't always best.

5 Stakeholder or personal?

Although the charges on stakeholder plans are capped, choice is restricted mostly to funds managed by the pension provider (see tip 4). A personal pension investing in the same life company's own funds may be just as cheap, however, and you will retain the option to switch to funds managed by other parties in the future.

6 Commission and fees

Should a third party, such as a financial adviser, be involved in setting up a plan, commission or a fee (either an up-front, one-off charge or an annual sum) may be payable. While this assistance may well provide good value for money, it is important to check that the benefits gained from using a financial adviser are not significantly eroded by the costs.7 Sipps

Self-invested personal pensions (Sipps) offer flexibility in terms of both investing pension contributions and taking the subsequent benefits. Sipps can, therefore, be considered useful vehicles for many, particularly those with additional assets that they can rely upon in retirement. For others, however, a Sipp may be unnecessary and may present an additional cost, but with little or no additional value.

8 Consolidation

Anyone holding pension benefits with a number of different providers should seriously consider consolidating them under one single plan, simply to make them easier to manage. It may be cheaper too, as many pension providers offer discounts for larger fund values.

9 Nearing retirement

If you are approaching retirement and already have a date in mind about drawing on your pension, it may be best to reduce the investment risk so that the value of the fund is not adversely affected by a fall in the stock market prior to your retirement date. Before doing so, however, consider whether you intend to buy an annuity (in which case your monthly pension will normally be set in stone) or you wish to leave the plan invested and take benefits via income withdrawal (which allows the money to remain invested, but releases a regular income).

10 Look beyond cost

The level of charges is important and needs to be carefully considered, but as with everything in life, the cheapest option is not always the best. With pensions, an investment fund or plan with high charges could still provide the best net benefit - which, I cannot emphasise enough, is the bottom line that every pension saver should be thinking about.