What is pension consolidation and is it worthwhile?

Long-Forgotten Plans

Managing your pension savings effectively and efficiently from a single pot

If you have worked for two or three different employers, it is possible you could have a workplace pension from each of them. Combine this with any personal pensions you may have set up and your total number of pension pots can quickly add up.

Pension consolidation lets you simplify your pension arrangements and makes it easier to manage your pension savings effectively and efficiently from a single pot. There is a danger that long-forgotten plans could end up in expensive, poorly performing funds, and the paperwork alone can be enough to put you off becoming more proactive.

Easy to manage

Is transferring or consolidating everything into one easy-to-manage pension the way to go? There are advantages to consolidating your pensions, but there are also pitfalls. The best course of action will depend on the types of pension you have and your term until retirement.

Having lots of different pensions could mean paying lots of different charges. It also means you’ve got to think about where your funds are invested in each of your different pensions to make sure you are keeping an eye on performance. In addition, to make any changes to your ever-growing number of pensions, you will have to deal with each of the numerous pension providers.

The pros and cons

Pensions are important, so it is crucial that you take time to understand exactly what you’ve got and exactly what you would be sacrificing by transferring out of an existing pension.

Before you transfer any pension, you need to be sure that you are not giving up any protected benefits such as protected tax free cash or protected pension age. You should also consider any features the plan has, like guarantees or life assurance benefits.

Remember that what you receive depends on several factors, for example, how your investments perform and how they are taxed, and you may get back less than you originally invested.

If you are considering consolidating your pension plans, this is a very specialist area, and you should seek professional financial advice.

Getting it right could mean a higher income

Making the most of your pensions now will have a significant effect on your happiness in retirement. Getting it right could mean a higher income, or even retiring earlier.