Whether you’re about to retire or still have a few years to go, your pension is probably the most important financial product you have, so it’s essential to ensure it’s working hard for you.
If you’ve had several different employers over the years and accumulated multiple pensions, it can be difficult to keep track of how they are performing. You might also have set up a personal pension plan, making the burden of burgeoning paperwork even more troublesome.
Having your pension savings in one single pot can simplify things, making it easier and more effective to manage. The process of merging all the pensions from every job you’ve held into one is known as pension consolidation.
By consolidating your pensions, you can see exactly what your total pension savings are worth, monitor the performance of your investments and assess whether you’re on track to hit your retirement goals.
Get it right and it could mean you enjoy a higher income or even an earlier retirement date.
The Pros and Cons of Pension Consolidation
There are pros and cons to combining your pensions. The best course of action will depend on what kind of pensions you have and how long you have until retirement.
- Long-forgotten plans can end up languishing in expensive, poorly performing funds and it’s easy to lose track of your savings over time.
- Having all your money in one place should make it easier to manage your savings and reduce the risk of overlooking any.
- Having lots of different pensions could mean you are paying lots of different charges.
- It also means you must think about where you have invested the savings in each of your different pensions to make sure you’re monitoring performance.
- To get valuations, rearrange your investments or alter your contribution levels you’ll need to deal with numerous pension providers, which can prove timely and problematic.
- Pensions are important so it is crucial that you take time to understand exactly what you’ve got and what you’d be giving up should you transfer out of an existing pension.
- If you’re currently paying into an employer’s scheme, you will be receiving contributions from them, topping up your savings, so leaving such a plan might not be a good idea.
- Similarly, if you have pension benefits in a final salary or defined benefit scheme, it is almost never a good idea to transfer out as these plans offer guaranteed levels of retirement income that will be difficult to match elsewhere.
- Before you combine pensions, you need to check whether you’ll need to pay exit charges and whether you will lose any loyalty bonuses or protected benefits such as tax-free cash or low pension age.
- You should also carefully consider any features your current plans have, like guarantees or life assurance benefits.
How to Consolidate Your Pensions
So, how do you go about doing it? One option could be to work out which is the best of your current pensions, then move all your money into that plan. You will need to pay close attention to any fees involved and make sure you understand the investment options and facilities the pension offers for the future.
Alternatively, you could start an entirely new pension plan and transfer everything into this scheme. This would allow you to select the perfect pension plan to meet your individual needs.
Whatever your hopes are for retirement it is important to ensure you are financially prepared. You may be plotting to travel the world, take up a new sport or have the quality of time to enjoy your home and family. We can help you to achieve your goals, taking every opportunity to increase your retirement reserves.
Pension consolidation is a highly specialist area and there are several issues to weigh up before you decide to go ahead.
If it is something you are considering, please contact us. Our independent professional financial advisers would be happy to review all your current options.