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Archived 12 Jul 2006

There's a good reason you'll have heard of remortgaging but not repensioning; because it's a term I made up to describe a sneaky technique which increases the total returns on existing personal or stakeholder pensions by thousands, without changing the plan or the risk at all.

This is about increasing the returns on existing pensions. For a basic guide to how pensions work and how much to contribute read the Pension Purchasing article. Also don't forget to check out and claim your state pension too.

WARNING! Suitable only for the very financially sophisticated

Repensioning is a complex concept. Treble check everything, question and ask for illustrations before acting, to ensure any pension transfer doesn't leave you worse rather than better off. This guide is not frequently updated so changes in regulations may not be included.

What is repensioning?

The concept is quite simple. Buy a pension via an Independent Financial Adviser (IFA) and this adviser reaps the commission for years to come. Alternatively, buy direct and the pension company keeps the cash earmarked to pay commission for itself.

This isn't a clarion call against financial advice, there's nothing wrong with it; providing, that is, you actually continue to receive it. Many people don't realise a pension adviser consulted just once, many years before, could still be receiving commission, and that to pay for it money is being continually dragged from their pension fund.

Even worse than that is when money is being taken from your pension fund, designated to pay commission, but is simply swallowed up by the pension company itself as you got your pension without advice.

Repensioning is simply a way to return this commission to you, meaning your fund will grow more quickly.

How repensioning works

Sadly, you can't simply tell the pension company ‘stop paying my former adviser commission'. Do that and it'll just keep the money itself.

It's about using pension discount brokers

There are a number of specialist pension discount brokers, which enable a way round this. Pension companies consider them to be just the same as normal financial advisers, which means they're paid commission from pension companies when they sell a pension.

Yet in practice, you simply tell them what pension you want and they get it for you, without advice, enabling them to rebate some or all of the commission they earn back into your fund, effectively reducing the charges, helping it grow more quickly. Therefore to repension, you need to find a way for the pension discount company to be your ‘adviser' rather than the pension company or a long forgotten financial adviser.

Repensioning isn't an easy technique and shouldn't be treated lightly. If what you actually want is pension planning or advice, then go back to your IFA or find a new one, so at least you get some value from the commission. To find an IFA near you visit

Repensioning in practice

While the discounters will help, it's important to rememember ‘repensioning' isn't something advertised, it's an idea created here, so you may need to explain, check and monitor it yourself. It's also worth noting that a limited number of pension providers, such as Standard Life, will block the practice.

  • Stakeholder Pension Repensioning

    Stakeholder pension providers aren't allowed to impose transfer penalties, making repensioning quite easy. Rather than do anything clever, just transfer your current pension to an absolutely identical one set up by the discounter. Therefore you have an identical plan, but with new lower charges.

  • Repensioning with a Personal Pension

    These days it's often possible to use the same ‘transfer' method for personal pensions as well as stakeholders. It used to be complicated by transfer and exit penalties, especially from with-profits funds, yet some of these have now thankfully been ended. Even so it's important to check very carefully you won't be penalised for moving.

    If that doesn't work, the alternative is simply changing the assigned ‘adviser' over from the IFA or pension company to the discount broker, so that it'll rebate the commission to you. This is a more difficult route and only really works for those who are increasing their contributions, typically in the years building up to retirement. This is because it is likely your IFA will have already received an advanced lump sum of commission from existing contributions, thus you'll only gain from new ‘increased' contribution.

Picking a pension discount broker

Only a few companies do this, so the comparison is swift. The overall winner is phone and internet company Cavendish Online. It rebates all the commission, and instead charges a one-off fee of £50 (£25 each for the transfer and new application). However, for the vast majority the extra growth massively outweighs the fee. Also as its been my past ‘repensioning' top pick, it has started to build up experience of the repensioning process.

The two top performing non-fee alternative discount brokers for this are Moneyworld-IFA and Hargreaves Lansdown's* discount arms, (which includes some useful information for those interested in changing funds too).

The size of the saving

Repensioning can substantially improve your position, whether the market rises or falls, at little or no cost.

Invest £200 a month, with contributions increasing by average earnings, in a standard stakeholder pension at full commission (ie with an IFAs advice or going direct) and assuming stockmarket growth of 5%, the final fund would be £185,000.

Yet if after 4 years, they repensioned via Cavendish online for a cost of £50, sticking with exactly the same investments, the fund would grow to £193,000, as the commission is being rebated into the pension.

It pays to repension
(Contributing £200/month increasing by ave. earnings for 30 years in a stakeholder pension)
Final Fund (1)
Fund Gain
Full Commission/Direct
Repension via CavendishOnline after 4 years
Quotes on a Norwich Union Stakeholder pension (1) assumes 5% fund growth
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