If you are at or close to retirement now might be the time to consolidate your pensions.
Over your working life you have probably paid into quite a few different company pension schemes with different employers.
Quite often the same employer will change pension schemes and providers over time leaving you with two or three different pensions with the same employer.
You may have even set up your own personal private pension at some point.
Here are five reasons why it’s a good idea to transfer all of your pensions into one and what you need to check first if you do decide to do this.
Why you should consolidate your pensions
#1 – Avoid losing an old pension scheme
The older your pensions are the more chance you may lose touch with them.
Pension providers can only get in touch with you if you keep your personal details up to date with them.
So, if you have moved home since you joined the pension scheme have you changed your address details with your pension providers?
Don’t rely on your employer to do this.
If you feel you did previously join a pension scheme via a former employer but have no details on it, you can use the government’s Pension Tracing Service to try and track it down.
#2 – Easier to manage
Dealing with multiple pensions will mean multiple login details to check values online and lots of different paperwork.
Moving all your pensions into one means you don’t have to deal with multiple pension providers.
#3 – Reduce your overall charges
Usually the more money you invest into a pension the cheaper your charges become.
A lot of pension providers will operate a tiered charging structure so that when your pension value rises above a certain level, the charge will lower.
By combining your pensions you have more chance of reaching the next tier on the charging structure.
#4 – More investment options
Most company pension schemes have limited investment options for your pension money.
A new modern day personal pension should give you access to most investment opportunities whether it’s investment funds or directly into shares trading on the stock market.
Some pension schemes will even allow you to invest in commercial property.
#5 – Flexible income options
Again most workplace pensions only have limited options when it comes to taking an income from your pension.
They will usually only let you take it all out as a lump sum (subject to tax) or via an Annuity.
Moving your pensions into a modern day personal pension should allow you flexi-access drawdown meaning you can withdraw what you like when you like (subject to tax).
It also means you avoid having lots of different income paid on different dates.
Things to check before you consolidate your pensions
As you can see there are many reasons why it’s a good idea to consolidate your pensions, however it won’t be right for everyone or right for every pension.
Here are a few things to watch out for:
- Defined benefit pensions – If you have a defined benefit (also known as final salary) pension then this is a completely different type of pension and you will need to go through an advice process to see if it’s right to give up the secured income.
- Still working for the same employer – It’s not a good idea to transfer your current workplace pension if your employer is still making contributions into it on your behalf as transferring may mean these stop. You are then essentially giving up free money!
- Penalties for transfer – Some pension schemes will charge you or reduce your pension value if you transfer away from them so make sure you are aware of the implications.
- Special benefits – Check with your current pension provider to see if you are entitled to any special benefits including guaranteed returns, higher tax free cash lump sum, guaranteed annuity rates or minimum pension. These benefits may be worth keeping if they suit your circumstances.
If none of the above applies to you then you may find that consolidating your pensions means they become greater than the sum of their parts.
If you are unsure whether consolidating your pensions is right for you then please get in touch for a free no obligation 15-minute call. We have carried out hundreds of pension reviews for our clients and have created many happy retirements. This could be you too!
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.