What to consider when combining your pensions?

You may have thought about combining (or consolidating) your pensions, but what are the benefits of actually doing this?
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If you have a few different pensions, then you might have thought about putting them all in one place to keep better track of them. Or, you might not have even known that you could do that!

The good news is that it’s a relatively straightforward process, but is it a good idea to consolidate pensions in the first place? What are the pros and cons, and are there any tips to make this experience a smooth one?

For anyone wanting to understand everything about this process, check out our beginner’s guide to pension consolidation.

What to think about when moving existing pensions?

Having lots of pensions is a good thing, but it can become a hassle to keep track of them all. By moving your pensions into one place there’s a lot less faff and paperwork to deal with, and it can make it easier to understand where you are in your retirement plans.

That said, there are a few things you’ll want to consider, such as does your pension have benefits attached and can your pension be moved? Not all pensions can be transferred, and if they have final salary benefits in place, then it might make sense to keep them where they are. If you’re not entirely sure whether this applies to your pension, then it may be worth seeing independent financial advice.

What are the benefits of consolidating your pensions?

Other than making it easier to keep track of your savings, there’s a few great reasons why you may want to combine your pensions:

  • Pay less in fees – do you know how much you’re paying in fees to your pension provider? Lots of people have no idea, but this cost eats into your retirement fund – the higher it is, the more you’re losing. By combining all your pensions into a provider with a lower fee you could end up saving yourself a small fortune.
  • It’s easier to manage – many pension providers just send a single, annual paper statement, so if you move house and forget about that pension it could be lost. In fact, it’s estimated that more than £19billion in pensions are lost this way![1] (Here’s how to find a lost pension if you're in this boat.) By just having just one pension – especially if it offers online management – it’s much easier to keep on top of it.
  • More control over investments – do you want a say in how your money is invested? Many pension providers don’t offer this; they simply put you in a fund that they believe suits your objectives. If you want your pension invested in ethical businesses, for example, you could switch to a provider who offers ethical pensions.
  • All online – if you’re sick and tired of digging through draws to find paper statements that give you an idea of what your pension was worth on a fixed date, then the perks of having it online probably won’t be lost on you. If you combine your pensions with a provider like Wealthify, you’ll be able to see exactly how your pension is performing whenever you want simply by checking the app.
  • More flexibility – most people don’t do much with their old workplace pensions, and chances are, you probably don’t engage with your current one much either. By consolidating your pensions into a private pension, you could have more flexibility over when and how you make payments, which makes planning for your retirement a little bit easier.

Should I move my pension when I change jobs?

With workplace pensions, every new job you have is likely to create a new pension. This can mean that your old one is left by the wayside a little bit, but it doesn’t have to be this way.

By opening a personal pension, you can have one pension that you take with you everywhere. A personal pension is not impacted by different jobs or new workplace pensions, and you typically have greater control over how your money is invested.

If you move jobs, you could combine your old workplace pensions into one personal pension, so that you don’t lose track of it and can continue to grow your retirement funds all in one place.

What are the problems with consolidating your pensions?

Although combining your pensions may be a game-changer for many people, it’s not for everyone. There are a few things that you’ll need to consider, including:

  • Exit fees – some providers charge large exit fees for moving your pension. This could reduce how much your pension is worth, and in some cases, be prohibitive.
  • Lose any benefits – if you’re lucky enough to have a pension that offers benefits, then transferring it away from them would mean you don’t get these benefits. So, if your pension offers things like guaranteed annuity rates or final salary pension, then you may want to keep it where it is.
  • Not all pensions can be transferred – if you work for the NHS, a school, or the government, the chances are you’ll have a public sector pension. These types of pensions can’t be transferred, so you’ll need to make sure you keep track of it.

Pension consolidation tips

If you’re fed up with hunting around for papers and you just want to easily combine all your pensions, then here are some tips that can help make things a little bit smoother:

  • Know who your providers are – the first thing you want to do is find who your providers are. If you haven’t already, it could be worth going back through any paperwork and trying to find the workplace pension you had at each of your jobs. If you’re not sure who that provider was, then the government’s Pension Tracing Service may be able to help.
  • Find your policy reference number – when you find your provider, next you’ll need to know your reference number which can be found on any paperwork they’ve sent to you. If you can’t find this, then simply get in touch with that provider – after a few security questions, they should be able to tell you’re your policy number.
  • Pick a new provider ­– this could be the hard part. There’s lots of pension providers available, so you want to do your research to find one that suits you. Low fees are important, as this will directly impact how much you’ll have in your retirement pot, but you also want to see what they offer – can you manage your pension online, do you have a choice in how they’re invested, and are they regulated by the Financial Conduct Authority? These are all important considerations to make.
  • Tell the new provider - Once you’ve done your research and picked a provider, you’ll just need to let them know you want to move your old pensions to them. They’ll generally ask you who the provider is with, your policy number and how much you want to transfer, and then they’ll do all the rest – only involving you if you need to sign something or talk to your old provider.
  • Plan for the future – with all your pensions in one place, all that’s left to do is plan for the future. This could be checking that you’re on target to hit your retirement goals, or that your pension is being invested in a way that’s right for you.

Looking to easily combine your pensions? At Wealthify, we make this process as simple as possible, letting you bring all your pensions into one place without any hassle. All we need to know is who your old pension providers are, your policy number, and how much you’re looking to transfer. We’ll do all the rest, and you’ll have more control over how your money is invested for your future. Find out more about our Personal Pensions and Pension Transfer service.

 

  1. https://www.abi.org.uk/news/news-articles/2020/05/19.4-billion-of-pension-pots-unclaimed-just-because-of-house-moves/

With investing, your capital is at risk, so the value of your investments can go down as well as up, which means you could get back less than you initially invested.

Your tax treatment will depend on your individual circumstances and it may be subject to change in the future.

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