Should I Consolidate My Pensions?

Dafferns Wealth

If, like many people, you’ve had several jobs throughout your working life, you’ll have picked up multiple workplace pensions.

But these can be hard to keep track of, both in terms of how much you’re paying for them and how well they’re doing, so you might be thinking of consolidating your pensions into just one place.

Here are several reasons why this might be an option worth looking at.

A single pension is easier to keep track of
Each individual pension can be tricky to monitor, but if you’ve consolidated everything into one pot, it’ll be much simpler to see if you’re on course to achieve your retirement goals.

That, in turn, can help you make positive changes, such as increasing the amount you put into your pension if you’re in a position to do so.

Less paperwork
It’s easy to ignore paperwork that’s dropped through the letterbox, and that’s particularly true if you’re receiving documents from more than one pension provider.

But consolidating your pensions means you’ll have less paperwork arriving, and the documents you do receive will give you a more complete picture of where your retirement plan currently stands.

It can be cheaper
Some pensions will have high charges attached to them, but you can reduce your costs by consolidating them, which in turn means you’ll have more money to save for retirement.

Easier to budget
Instead of receiving small payments from multiple pension schemes, you can receive a single larger payment if you’ve consolidated them into one single pot. As a result, it can be easier to work out how much money you have coming in each month and to budget accordingly.

Better returns on your investment
Many pension schemes won’t offer the widest range of investment options, so if you consolidate them together, you could have more options open to you. As a result, you can be much more flexible when you’re choosing an investment strategy to fund your retirement.

But if you’re considering this option, it’s worth looking at the overall picture. For instance, you may have guaranteed annuity rates or other benefits with certain schemes, which you’d lose if you consolidated them into a single pot.

At the same time, you may be charged an exit fee if you leave your scheme, in which case you could be better off sticking with it in the long run.

You need to measure the costs alongside the potential benefits before deciding on a course of action, and that’s where a financial advisor can offer valuable support.

Deciding on a plan of action and going through reams of complicated paperwork can be daunting, but a professional, regulated specialist in this field can guide you through the process from start to finish. That means you can make informed decisions with confidence – the value of which can’t be overstated.

A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can down as well as up which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change. You should seek advice to understand your options at retirement.

Leave a comment