By Sam Brooks, Private Client Adviser
If you have paid into several different pensions over the years and find it hard to stay on top of all the paperwork, you may be considering consolidating your pensions into one plan.
More than one in five people have lost track of some of their pension savings, according to a survey by Aegon, Its research found that 67% of people would be interested in combining their pensions with one provider, although 43% said they would need more information about the potential benefits.
Kate Smith, head of pensions at Aegon, said:
“With so many people losing track of a pension it’s perhaps not surprising that 67% of people are interested in consolidation even if they have to track down a pension first.
“There can be benefits to consolidation as many older-style pensions often have complex or more expensive charges. They are also unlikely to offer access to the new range of pension freedoms or give access online. However, it’s important people take time to understand the pros and cons of consolidation and are clear on whether it’s right for them. This is where professional financial advice will really add value.”
Here, we explain some of the advantages and disadvantages of combining all your pensions in one place.
Pros of Consolidating:
- Ease of Administration – Putting all your pensions together under policy allows you keep to track of your pension’s management charges and investment performance in real time, making the process far more convenient than dealing with several providers.
- Increased Investment Choice – If you were to transfer you pensions into a Self-Invested Personal Pension (SIPP) then you enjoy greater investment freedom. A SIPP, unlike many personal pension plans, allows you to invest in a wide range of assets, from shares to mutual funds to government bonds and even commercial property or land.
- Fees – You may also be able to reduce the charges you pay. This is because many of the older style pension policies have higher charges and some pensions have fixed costs associated with them. By consolidating several pensions into one, the fixed charges may be reduced.
Cons of Consolidating
Although consolidating multiple pensions together makes life simpler, there is a risk that you could lose some of your pension benefits if you move them.
- Employer contributions –For example, you might lose employer contributions if you transfer funds from a workplace pension that you’re still an active member of.
- Bonus eligibility – You may also have to forfeit any loyalty bonuses you might have been eligible for and there’s a risk you’ll no longer be eligible for a spouse’s pension if your previous scheme offered this as a benefit.
- Exit penalties –Another potential downside is that when you transfer funds out of a pension, your provider may impose an exit penalty, so make sure you find out if there is one and how much it will cost you.
Get your pensions in order with 4 simple steps:
- Use the DWP Pensions tracing service to find your pension by entering your old employer’s name which will generate the current contact address. Simply write to this address, with your current and any previous name, current and previous addresses and your National Insurance number. Go to: uk/find-pension-contact-details
- Some pension schemes won’t have been updated for some time. To get the contact details you will need to fill out an online form with your name, email address and any information you believe is relevant such as the dates you were at the company and your national insurance number.
- Get a State pension forecast, either in paper format or online uk/check-state-pension
- And once you’ve tracked down your pensions, get advice before consolidating them to make sure you don’t lose out on any valuable benefits.
Contact us at info@w1invest.com for more information or guidance on the process.
