Consolidating Your Pensions

Oct 19, 2022 | Pensions

If you’ve been contributing to a pension for a while, you may have accumulated several different pots with different providers. Many reach retirement age with multiple retirement pots due to starting a new pension every time they start a new job. This can be a good thing, as it allows them to diversify their income sources. However, it can also be a challenge to keep track of multiple account balances and investment strategies.

You may be wondering whether it’s worth consolidating your pensions into one pot. Here are some things to consider before making a decision.

The Pros of Consolidating Your Pensions

There are several benefits to consolidating your pensions. For one thing, it can make it much easier to keep track of your retirement savings. Instead of trying to keep track of multiple pots with different providers, you would only need to keep an eye on one pot. This can also make it easier to ensure that your pension is invested in line with your overall financial goals. With several pots, it is nearly impossible to know how your money is being invested and to make sure you are taking the proper amount of risk and earning the right amount of return for your particular scenario.

Another advantage of consolidating your pensions is that it could save you money in fees. If you have multiple small pots with different providers, the fees can add up over time and eat into your retirement savings. By consolidating your pensions into one larger pot, you might be able to negotiate lower fees with your provider.

Consolidating into a new pot allows you to benefit from the latest investment innovations, many old pots might be invested with a UK bias or might not utilize asset classes that have recently become more popular.

Consolidation can also make it easier to plan for retirement because you would have a clearer idea of how much money you have saved up.

The Cons of Consolidating Your Pensions

There are also some potential drawbacks to consolidation. For instance, if you consolidate your pensions and then switch jobs, you may not be able to take your pension pot with you. This could mean that you lose out on valuable employer contributions.

Abandoning important product characteristics of previous pensions, such as “guaranteed annuity rates” (GARs), which guarantee an often-attractive annuity rate compared to current market rates is a feature that may be lost on transfer.

You should consider giving up “small pot privileges,” such as the opportunity to use pots under £10,000 without triggering the “Money Purchase Annual Allowance,” a strict cap on tax-free future pension saving. Or, giving up other “protected” aspects of your old pension, like the option to use it before the usual minimum pension age of 57 by 2028, which is being recommended.

Lastly, some pension providers offer special features or benefits that might not be available from other providers.

There’s no right or wrong answer when it comes to whether or not to consolidate your pensions – it depends on your individual circumstances and what’s most important to you. However, If you’re thinking about consolidating your pensions, do your research first and compare the features and benefits each provider offers. By weighing up the pros and cons, you should be able to come to a decision that’s right for you.

This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

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By scheduling an appointment with an adviser they will reach out to you at your requested time. 
Personal advice, whenever it suits you.

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