If your long-term goal is to retire comfortably, understanding how to manage your old pensions is essential – especially if you have accumulated multiple Workplace Pension pots over the years.
Many people find themselves juggling several pension pots, each with its own provider, fees, and paperwork. For some, this can cause confusion or missed opportunities.
That’s where pension consolidation comes in.
Whether you’re approaching retirement or just want more control over your savings, this article will help you make an informed choice about your pensions.
What is Pension Consolidation?
Pension consolidation is the process of bringing together multiple pension schemes. It is as straightforward as identifying what pensions you have and then transferring them into one pension provider.
This can simplify the management of your retirement – potentially offering cost savings, increased investment choices and greater control over retirement planning.
Why should I consolidate?
Greater investment control
Some older pension schemes offer limited investment options. Moving your pensions into one pot can give you access to:
- A wider range of investments that could align better with your risk approach
- Easier understanding on how your money is performing
This can help align your investments with your retirement goals and values.
Simplified management
Juggling multiple pension pots across different providers can make it harder to keep track of your retirement savings. Consolidation means:
- One set of paperwork
- One provider to contact
This makes planning and managing your retirement much easier and less time-consuming.
To align with your preferences
Consolidating your pensions enables you to have a comprehensive view of your investments and pensions in one place, as well as the chance to have better control over your investment strategy.
You can create a unified investment plan that aligns your retirement pots to your attitude towards investment risk, from cautious all the way to aggressive.
Considerations of pension consolidation
While the benefits are compelling, consolidation isn’t right for everyone. Some older pensions may come with valuable guarantees (such as guaranteed annuity rates or protected tax-free cash) that you could lose if you transfer out. LGPs (Local Government Pension Scheme) and beneficiary pensions cannot be consolidated.
The amount you may potentially pay in pension transfer charges or exit penalties will vary from provider to provider and from scheme to scheme. It’s important to check these fees with your existing provider before you transfer.
Ultimately, there are some circumstances in which it isn’t the best option, so it’s worth consulting with a financial adviser about what you should do.
How to get started
Gather information on all existing pension schemes
This includes details of providers, policy numbers and the current value of each pension pot. If you’ve lost track of any, the UK Government’s Pension Tracing Service can help you find them. You’ll need the name of the employer or pension provider to get started.
Compare fees and review pension details
Consolidating pensions can be cost-effective if it reduces the overall fees you’re paying. Review factors such as the current value, fees and charges, investment performance, any special benefits (e.g. guaranteed annuity rates) and exit penalties.
Select a pension to consolidate into
If you decide to go ahead, you’ll need to choose a new pension scheme to consolidate your pots into.
Transfer your pensions
Once you’ve chosen a provider, you can begin the transfer process:
- Contact your new provider – many offer a pension transfer service to handle the paperwork
- Fill out the necessary forms and authorisations
- The provider will contact your old pension schemes and arrange the transfer
Monitor and review regularly
After the transfer is complete, it’s important to regularly review your consolidated pension. Monitor performance, check fees, and update your retirement goals as your circumstances change.
Final thoughts: is pension consolidation right for you?
Pension consolidation can be an option if you’re looking for simplicity, and greater control over your retirement savings. For many people, having a single, well-managed pension pot can make it easier to plan for the future and stay on top of their finances.
However, it’s not always the best choice. Some pensions come with valuable benefits or guarantees that you could lose if you transfer them. That’s why it’s important to review each pension carefully, compare your options and consider seeking independent financial advice.
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. This material is not a personal recommendation or financial advice and the investments referred to may not be suitable for all investors.
Tax is subject to an individual’s personal circumstances. Tax rules and allowances can change at any time.
Pension eligibility and tax rules apply.
Before deciding if pension consolidation is right for you, you should consider all of your options. You should be aware that there may be exit fees on some pensions and there may be valuable guarantees that could be lost on transfer. For this reason you should list all of your pensions and fully assess your circumstances. Speak to a financial adviser if you are uncertain of what the best course of action is.
True Potential Wealth Management is authorised and regulated by the Financial Conduct Authority. FRN 529810. Registered in England and Wales as a Limited Liability Partnership No. OC356611.
True Potential Investments LLP is authorised and regulated by the Financial Conduct Authority. FRN 527444. Registered in England and Wales as a Limited Liability Partnership No. OC356027.
True Potential LLP is registered in England and Wales as a Limited Liability Partnership No. OC380771.
