Is Pension Consolidation a Good Idea?

What is Pension Consolidation?

Consolidating your pensions means putting most or all of your pensions together into one pension ‘pot’. Gone are the days of a job for life, and even the most dedicated employees have held several posts with multiple employers over their careers. That means they can have built up quite a collection of pensions over the years. There could also be personal pensions, especially if you’ve freelanced or been self-employed.

Is Consolidating Pensions a Good Idea?

Consolidating your pensions can make it easy to keep track of them, as well as keep an eye – and potentially a lid – on administration fees. With just one combined pension pot, it’s easier to monitor those fees and could also help to reduce them. Those fees could be eating your old, disjointed pensions away.

1.6 Million Lost Pensions

In our previous blog latest estimates from the Association of British Insurers (ABI) indicate that 1.6 million pensions, amounting to almost TWENTY BILLION pounds’ worth of potential retirement income, are simply ‘lost’. Consolidating pensions can help you recover control of your money, and in some circumstances, we can even recover ‘lost’ pension pots.

Even if your pension pots aren’t lost, they may not perform as well as they could or incur excessive charges. For example, according to Which, if a 35-year-old with a £10,000 pension pot invests until 65 in a fund that achieves 5% annual investment growth but charges 2% a year, the pot will be worth £23,720.  The same £10,000 invested in a fund that achieves 7% annual investment growth, with a 1.5% annual charge, will be worth £48,541.

That’s more than DOUBLE. Bit of a no-brainer, huh?

How Do I Know if I Should Consolidate Pensions?

Is consolidating pensions the way to go? Should you consolidate pensions if you change job? Final salary schemes, for example, might be best left as they are. Other workplace pensions, which depend upon the success of investments, should at the very least be investigated.

Today’s auto-enrolment pensions don’t follow you if you leave an employer, raising the spectre of separate pension plans from separate providers each time you change your job. This multiple pension pot scenario is currently under scrutiny from regulators and the financial services industry.

Benefits of Consolidating Pensions

Taking care of your pensions now could make all the difference to your future; get it right, and you could see a higher income and a nice, comfortable retirement. Maybe even earlier retirement. Better returns aren’t guaranteed, but there’s more chance with investment choices and minimised charges. 

There are pros and cons to everything, though, and that’s why professional advice is crucial. It’s more streamlined to keep track and manage your pension pot with just one scheme, and you could access a much wider choice of investments. You could lower your overall costs compared to an old pension plan with high charges. Conversely, taking money from a final salary pension is usually a bad idea, and some schemes have exit penalties. Also, some old pensions schemes may have benefits that you’ll lose if you move your money. Good advice is essential.

How do I Consolidate my Pensions?

Overwhelmed? Daunted? No idea where to start? That’s where Bulbfin can help. Anyone with more than one pension can benefit from Bulbfin’s free, impartial and FCA-regulated pension advice. Book a call with one of our expert pension advisers. On that call, we will help you decide whether pension consolidation is right for you. This will be entirely your decision, based purely on your best interests. All we do is arm you with all the information.

Then, if consolidating pensions is best for you, our advisers can make it quick and easy to gain clarity and control over YOUR money. They will recommend and arrange the best products for YOUR needs. Get started completely free of charge, and discover how you can make the most of your retirement. Depending on the product you apply for, there may be management charges and fees, but there are no upfront costs. Our expert advisers will always be completely clear regarding any costs.

Risk Warning
Any investment carries a degree of risk and your investments may decrease in value or fail. The levels and bases of taxation and reliefs can change at any time and are dependent on individual circumstances.