When we talk about consolidating pensions, what is actually meant? It is the transfer of multiple pension pots into a single portfolio.
Auto-enrolment into workplace pensions was introduced in the UK in 2012. Those who have moved jobs since then will likely have more than one pension pot. There is no legal limit on the number of pensions that can be held by one person. However, there are reasons you may wish to consolidate your pensions into one pot, which we’ll explore in this article.
Reasons to consolidate your pensions
A key advantage of having fewer pension pots is the life admin benefits it brings. When you move house, it is best practice to inform your pension provider of your new address. This will stop the potential of losing track of the pension pots. The more pension pots you have, the more providers you’re likely to have. This could cause an administrative headache when you need to update your details.
If your pensions are in one place, it is easier to track the full amount available to you on retirement. This means you can plan your retirement more effectively as you will not have multiple pots to calculate. This can make it easier to track the progress of your pension funds towards your retirement goals.
Pension schemes are not all the same. Some will have higher fees than others, and some will have better investment options than others. By consolidating your pensions into one scheme, you are able to take advantage of the better investment opportunities. Additionally, different pension providers may have different rules regarding access to your pension funds, for example, the age from which you may draw down your pension and associated fees. Following consolidation, you will have fewer regulations to comply with, making it less confusing for you.
Pension provides with higher annual management fees could be eating into your pension pot. Consolidating away from these providers to those with lower charges could save you a considerable sum in the long run. This leaves more money available to you in your retirement.
Reasons why consolidating may not be the right choice for you
Despite the benefits of consolidating pensions, there are some instances where this may not be the right choice for you.
If you hold a Defined Benefit pension, you will have a specific annual income guaranteed throughout your retirement. The amount will depend on how long you have been part of the scheme and your final salary. Private pensions are investments, with no guarantee of fund growth*, so it is usually not worth consolidating away from them.
Before you consolidate pensions it is worth checking if there are any exit fees from your existing pensions. If there is an exit fee and it is high, it may be more costly than beneficial to transfer out of this scheme. It is also sensible to check any additional benefits that are offered along with the pension. For example, you may have life insurance or other protection policies tied up with your pension. You’ll lose these policies if you transfer the pension to a different scheme.
How Willday Wealth Management can help with pension consolidation
For those without some financial knowledge, pensions can be a source of confusion. Willday Wealth Management can help you make sense of the options, with our expert advice. We’ll explain the available options, and discuss with you if pension consolidation is the right option for you.
If you decide to go ahead with consolidation, we can help there too! We’ll take care of the whole process on your behalf. We’ll talk to your existing providers and move your pensions to your Willday account. This process usually takes 3-4 days and is as paperless as possible, depending on your provider. All we need from you to get started is your current providers’ name, your pension account number, pension values and valuation date. We’ll do the rest.
If you’re not sure if you have multiple pension pots and want to check, Willday are also on-hand! Our Find My Pension service will contact over 100 providers on your behalf to discover any missing pension pots. Once located, we’ll explain your options for consolidation.
Contact us now to consolidate your pensions with us, and start helping your money work harder for you.
*With investing, your capital is at risk and you may get less than what you invested. Tax treatment depends on your individual circumstances and may change in the future.
