Pension consolidation is the act of combining several different pensions into one pot.
Most individuals accumulate multiple pensions over the years as they change jobs and are automatically enrolled onto new pension schemes.
Whether or not you decide to consolidate your pensions will depend on your personal financial situation and the types of pensions you have.
Here are some ways you might benefit from consolidating your pensions:
01
Every pension pot you have will be subject to an annual management fee – so if you have multiple pension pots, you may be able to save money by consolidating them into a single pot that is potentially subject to a single, smaller management fee.
Just a small change like this could save you lots of money in management fees over time – but it’s vital to consult a financial adviser to check you aren’t inadvertently signing away any advantageous benefits.
02
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If you have pension pots invested in lots of different funds, some are likely performing better than others (although it’s important to remember that past performance does not guarantee future returns).
Combining your pensions into a different scheme, for example one that offers a wider range of investment options, could potentially help boost investment performance and make your pension pot work harder for you.
Pension consolidation is not suitable for everyone and merits careful consideration. Here are some situations where consolidation might not be suitable:
01
If you have a defined benefit (final salary) pension, it’s not usually worth moving these into a defined contribution pension scheme. You would not only transfer investment risk from your employer to yourself, but a final salary scheme may offer enhanced benefits that you wouldn’t want to lose.
The only time you might want to consider transferring a defined benefit pension is if you are concerned about the safety of your pension (for example, if your employer is facing financial difficulties).
02
As we’ve previously mentioned, some pension schemes offer additional benefits that you would lose by consolidating. Examples include guaranteed annuity rates, employer-matched contributions and protected tax-free lump sums.
It’s vital to speak with a financial adviser to ensure that the benefits of any action you take outweigh the costs, both at the time of consolidation and at retirement.
03
If some of your pension schemes have high exit fees, you might face charges when consolidating your pensions. Again, it’s worth taking advice to weigh up the pros and cons of consolidation before acting.
Pension consolidation doesn’t have to be an all or nothing approach. It is entirely possible to consolidate some of your pensions into one pot whilst leaving those with particular benefits or punitive exit fees untouched.
Whatever route you choose to take, navigating your pension consolidation options can be complex. To avoid making costly mistakes that could impact your retirement, please feel free to get in touch with us. We can analyse each of your pensions and recommend consolidation options to maximise your hard-earned savings.
The guidance and/or information contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK.
RetireInvest Limited is registered in England and Wales. Company Number 09916200. Registered Address 4 Finkin Street, Grantham, Lincolnshire, England, NG31 6QZ.
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The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.
Registered Address 4 Finkin Street, Grantham, Lincolnshire, England, NG31 6QZ.
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Neither Retire Invest Nor Quilter Financial Planning are responsible for the accuracy of the information contained within the linked site.
Neither Retire Invest Nor Quilter Financial Planning are responsible for the accuracy of the information contained within the linked site.
Neither Retire Invest Nor Quilter Financial Planning are responsible for the accuracy of the information contained within the linked site.
Neither Retire Invest Nor Quilter Financial Planning are responsible for the accuracy of the information contained within the linked site.
Neither Retire Invest Nor Quilter Financial Planning are responsible for the accuracy of the information contained within the linked site.
Neither Retire Invest Nor Quilter Financial Planning are responsible for the accuracy of the information contained within the linked site.
