The majority of people will say the former – rather than dealing with different pensions providers and paperwork, they may just let the money sit there and trust it to fate.
This doesn’t have to be the case though. By combining all your pensions in to one pot, this may make them easier to manage as well as enabling you to see how your investments are performing.
BUT – you should note that consolidating your pension pots is not always appropriate for everybody and that is why seeking independent financial advice, ideally with a Pension Transfer Specialist, would be a sensible place to start.
So, with that in mind: should you consolidate your pensions?
Firstly, you need to check that your pensions can be moved. This depends on the type of pension you have (e.g. a money purchase occupational scheme, a personal pension, or a final salary scheme) and in some cases, who the scheme is with.
As an example, if you want to transfer any defined benefits into an existing defined contribution scheme so that you can combine your pension pots, you’re no longer allowed to do this if your defined benefits are in an unfunded public sector scheme. (Unfunded schemes include the Teachers’ pension; NHS; Civil Service etc. The main funded public sector pension scheme is the Local Government Pension Scheme).
If your pensions pots can be moved, then you may want to consider consolidating your pensions to:
Yes, there can be. For example:
Just from the points we have covered in this article, it is clear that there are many pros and cons you should consider before consolidating your pensions. That is why it is imperative that you fully understand all the risks and costs involved, and why our recommendation is that you seek independent financial advice.
In fact, if any of your pension pots have guaranteed benefits that are worth over £30,000, then you are legally obliged to receive independent advice before you move pension providers.
As we have discussed, for many people, consolidating their pension can be beneficial, providing more control and flexibility and the potential to improve performance and even pay lower fees all within one easy to manage pension.
But, there can be downsides too, as we have discussed, and the consequences could affect how much pension you get in the future. In a nutshell, making the wrong decision could see you lose out financially, with high exit and management fees that you’ll never get back.
That is why seeking independent financial advice from a pensions specialist should be considered. After all, this is your financial future you are playing with, and to get it wrong could have serious implications.
At First Equitable we are pensions specialists and have many years of experience helping clients achieve positive outcomes with their retirement planning. If you would like to receive some friendly and helpful advice, in a language you can easily understand, then please get in touch by giving us a call or filling out a contact request form and we will call you back at your convenience.