As you grow older, you may find that you start to amass a variety of pensions. If you’re in this situation, you might be tempted to move them into one single pension. Good idea? Let Narrative Wealth give you the lowdown on pension consolidation.
Why consolidate?
A job for life is rare these days. That means people gradually gather work pensions as they move from role to role. The result: a collection of pensions that can be difficult to manage. In these circumstances, you might think ‘can I transfer my pension into another pension?’ This may be a good idea for several reasons:
- Easier to manage. Transferring all your pensions into one pot will make it easier to manage your pension and keep track of its performance.
- Reduced fees. With a single pension you can see exactly how much you’re paying in fees and/or move your pensions to the one that has the lowest fees.
- Increased gains. You can move all your pensions into the one that performs the best. A single, larger pot may give you more investment options.
Pension consolidation (UK) rules
If you’re thinking about transferring your pensions into one pot, you should be aware of some of the UK rules and how pension transfers work in practice.
- Pension pots worth less than £1,000 will be consolidated under new rules set to be in place by 2030. By cutting duplicate charges, consolidation could help you keep more of your money. The government says this could boost the average worker’s retirement savings by around £1,000. The average pension pot in the UK is £21,875 .
Considered your options? Decided to consolidate your pensions? This what you need to do:
- Collect information on all your existing pensions schemes including policy numbers.
- Check the terms and conditions of each pension.
- Select the pension you want to consolidate into.
- Talk to the provider involved and arrange to transfer your pensions.
When to combine your pensions (and when not to)
Consolidating during a market fall is obviously a bad idea. You should also look out for red flags that indicate consolidating pensions would be financially risky. Ask yourself these questions before you decide to go ahead.
- Are there any perks in my existing pension that I'd be missing out on if I give it up?
- How do the charges and investment choices of my old pension(s) compare to the one I will be consolidating into?
- Are there exit penalties that apply to the schemes?
- Will consolidating give me greater investment choices?
- Will consolidating give me access to better annuity rates?
Getting financial advice
Planning for your financial future is crucial, so if you’re in Wimbledon Village or the wider London area, book a discovery call with Narrative Wealth.
The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.