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Should I consolidate my pensions?

Money Tips

Should I consolidate my pensions?

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Profile Pensions
Profile Pensions

Many of us will work for several different employers over our lifetime, and so may end up contributing to lots of pension schemes.

It’s not always easy to keep track of all these plans, particularly when most of us lead busy lives.

According to research by wealth management group Tilney, the average person has worked for 5.8 employers by the time they are aged over 55. This number is forecast to rise significantly in years to come as those currently aged between 18-34 have already had on average over four jobs. The Department of Work and Pensions (DWP) estimates that the average person will have 11 employers over their working lives, which could mean 11 different pensions. This estimation from the DWP is already starting to show with some of our own customers coming to us for pension advice with as many as 11 transferable pensions.

Often, we lose touch with our pension providers when we move home, with the Tilney research revealing that 13% of those who’ve moved to a new property have never told their pension providers of their change of address, whilst a further 12% admit they’re unsure whether they told their providers or not.

How consolidating your pensions can help

Moving your pensions into just the one plan can make it much simpler to manage your retirement savings, and to monitor where your retirement savings are invested.

For a start you’ll only receive one pension statement a year rather than several, so it’ll be easier to stay on top of the paperwork. Your statement should show you the current value of your retirement savings and how much you may get when you come to take money out of your pension.

Consolidating your pensions can also give you greater control over how your money is invested, and you may be able to choose a plan which offers you a much wider range of investment options than your current pensions do. You may be able to reduce the charges you pay on your pension too by transferring everything into one plan.

It should make things more straightforward when it comes to taking your pension benefits as well, because you’ll just have the one pot from which to take either a regular income, smaller lumps sums, or a guaranteed income from an annuity. You can, of course, choose a combination of these options if you want.

Things to be aware of when consolidating your pensions

Before you consolidate your pensions, it’s important to work out the costs involved. Some pension schemes may, for example, charge you an exit penalty if you move your money elsewhere. If there is one, you’ll need to weigh up whether this is worth paying for the benefits of consolidating. Always seek independent pension advice before deciding on whether consolidation is appropriate for you.

You should also check whether you’ll lose any benefits if you transfer out of your existing pensions. For example, if one of your current pensions offers you the ability to take more than 25% of your fund tax-free, you may decide you’re better off keeping it. If you belong to a final salary or any other pension offering safeguarded benefits, transferring might not be the most appropriate solution as you could lose out on a guaranteed level of pension in the future, and you must seek professional financial advice if you’re considering taking this route.

It’s really important to understand the options available to you before consolidating pensions and one of the best ways is to get impartial information and advice. Profile Pensions is authorised and regulated by the Financial Conduct Authority and our advisers are obliged to give you advice that’s in your best interests, based on your individual circumstances.

So if you have one or more pensions and you want help to understand whether consolidating them is the right choice for you, start by contacting us.