As you grow older, you may begin to dream of retirement, a chance to give up work and enjoy the many exciting things about life, such as holidays, playing sports and shopping. For some, the state pension you receive is enough to provide a basic level of income. However, for many, you will have realised you need to supplement the basic income with some form of pension scheme. You will also find that many of your employers will actively encourage you to contribute a fraction of your wage towards your pension. The majority of people will have a pension set up. Many people actually have more than one; this is why pension consolidation may be something you want to consider.
What does pension consolidation mean?
You may have pensions with several employers throughout your working life, which will mean you could have a large collection of pension pots or schemes spread out or with different providers. You may also have a number of personal pensions if you have been self-employed. Consolidation is the process of combining all your pensions into one pension/ retirement income. You should begin by thinking about where you have worked in the past and check you have accounted for each pension from previous jobs.
Should you consolidate your pensions?
You may decide to combine your pensions to save money, get better growth, and make your pensions easier to track and manage. Each pension will have management fees which may vary depending on the pension; you could save money from moving your pensions into the fund with the smallest fees; a financial planner can help advise you about this and may also be able to help you find a fund with lower fees. You may also achieve better growth by merging pensions. Alternatively, your financial planner may recommend you change to a whole new fund.
Why is pension consolidation a good idea?
Managing just one pension is much easier than trying to manage several. It will make your life easier and allow you to keep track of where your retirement savings are up to; likewise, when you get to retirement, it is much easier to access one or two pensions rather than 10. When managing your pension, you should be doing more than just checking the balance; you should be assessing if you are in the correct risk profile, and this will change as retirement approaches. It will also be a lot better once you arrange to draw your pension if you only have one to worry about.
Are there any reasons to not combine your pensions?
Some pensions have valuable benefits and guarantees, which means that transfers will make you lose out on these. Consolidation needs to be carefully considered along with deciding what your objectives for retirement are.
We can help you make the best decision for your situation; we can explore your pensions and the options you have available to you. Please get in touch if you think pension consolidation is something you’d like to consider.