Bringing pensions together

Why you should consider combining your pensions

Employment has changed significantly over the past few decades with many of us switching careers multiple times before we retire. The idea of a ‘job for life’ is now a thing of the past. In fact, research shows [1] the average person changes jobs 12 times in their lifetime.

This can make it harder to keep in touch with all the different pension providers we have over the years, resulting in many of us missing out on money we’re owed. There is an estimated £9.7 billion of unclaimed defined contribution pension funds in the UK. [2].

What to do if you have multiple pension pots

Even if you can stay on top of what you have saved and where, managing several different pension pots can be challenging. If you’re one of the millions of people with multiple pensions it is sensible to consider consolidating them into one pot that is easier to track.

Number of different pensions

If appropriate for your circumstances, pension consolidation is a great way to simplify one area of your finances. It can make it easier to plan for your retirement and to manage your money once you have retired.

But be aware that not all types of pensions can or should be transferred. It’s important to seek professional advice so you have a full picture of your individual situation and can compare the features and benefits of the plan(s) you are thinking of transferring.

What is pension consolidation?

Pension consolidation is the process of combining multiple pension pots into one single pot. It can be done via a pension transfer or by opening a new pension and transferring your other pensions into it. You may do this to make it easier to keep track of your retirement savings, or to try to get a better rate of return on your investment.

But there are a few things to consider before consolidating your pensions. Make sure you are aware of any exit fees that may be charged, and whether you will lose valuable benefits such as guaranteed annuity rates.

Reasons to consolidate your pensions

1. Simplify your finances: If you have multiple pension pots, it can be difficult to keep track of them all. Consolidating your pensions into one pot could make it easier to manage your retirement savings.
2. Save on fees: If you have multiple pensions with different providers, you may be paying multiple annual fees. Consolidating your pensions may help you save money on fees.
3. Get better investment options: Some pension providers offer a limited number of investment options. By consolidating your pensions, you may gain access to a wider range of investments.

Reasons not to consolidate your pensions

1. Loss of valuable benefits: You may lose out on valuable benefits specific to certain pension schemes. For example, some schemes offer better death benefits than others, so consolidating your pensions into one pot could mean giving up this valuable protection.
2. Paying higher fees: Another potential downside is that you could end up paying higher fees than you are currently depending on what route you decide to take. This is something that needs to be carefully considered.

How to track down your pension funds

You can use the government’s Pension Tracing Service at https://www.gov.uk/find-pension-contact-details to locate money you previously saved for retirement that is currently unclaimed.

Be aware that pension savings are major targets for fraudsters. If someone contacts you unexpectedly offering to help you transfer your pot, it’s likely to be a scam. If you’re concerned, contact the Financial Conduct Authority (FCA) to check they’re legitimate.

Need professional advice to help make your decision?

Before you look to bring your pensions together, it’s essential to obtain professional advice. Call today for more information about how we can assist you through this complex process.

Source data:

[1] https://www.zippia.com/advice/average-number-jobs-in-lifetime/

[2] https://www.pensionspolicyinstitute.org.uk/media/2855/201810-bn110-lost-pensions-final.pdf

CAVEAT:

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS PLAN HAS A PROTECTED PENSION AGE). 

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. 

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.