What are the benefits of pension consolidation?

Some of the key benefits of combining your pensions into one pot include:

• Easier to track and manage

• Wider investment choices

• Reducing fees and costs
• Greater flexibility

Let’s look at each of these in more detail.

How does merging my pensions make them easier to track and manage?

To manage your pension effectively, it needs a regular review. This means ensuring that your current investment choices align with your risk profile and goals and monitoring the growth and performance of the fund.

Consolidating your retirement pots can make life a lot easier. After all, it’s much more straightforward to manage one pension than it is to look after multiple.

Having one pension pot also means less paperwork to keep track of and less hassle if you need to change information with your current provider.

Does merging your pension give you more investment choices?

Many pension schemes offer a limited range of investment options. However, combining them into a single scheme could give you more choice and control over your pension investments.

Transferring to a self-invested personal pension (SIPP) could give you access to an even wider choice of investment funds. SIPPs offer a much more comprehensive selection of investment options than other pension types.

Having all of your pensions in one place could also increase investment performance and the overall value of your pension savings.

Can combining pensions into one pot reduce fees and costs?

Each pension has its own management fees and charges.

And while you may no longer be making pension contributions to the fund, the scheme administrator will continue to charge you for managing the fund. However, there are some potential cost savings benefits if you combine multiple pensions into one pension fund.

Having all your pensions in one pot and paying a single fee may help reduce the administration charges you are currently paying.

You should contact the pension provider to check the charges for a given fund. Alternatively, you can look at your pension statements to see any charges.

Will consolidating my pensions provide more flexibility over my retirement savings?

Pension rules have changed in recent years. Different types of pension plans now offer more freedom and flexibility over how people access their retirement income.

With a newer type of pension scheme, you often have access to options like flexible drawdown, something that older plans do not offer.

Check with your current pension provider for more information on accessing your pension and available options.

Things to be aware of before consolidating your pensions

Before you begin the transfer process, there are some questions you should ask yourself. These include:

Are you giving up final salary pension benefits?

Final salary pensions are also known as defined benefit (DB) pensions and are different from defined contribution pensions.

Defined benefit pension schemes provide a guaranteed income for life. Transferring one of these could result in losing out on some of the scheme’s valuable benefits. However, there are situations where transferring a DB pension may be beneficial.

For defined benefit pension transfers of £30,000 or more, you are required to seek advice from an FCA-regulated financial adviser by law. The adviser must have permission for the activity of ‘advising on pension transfers and pension opt-outs’.

Will you give up perks such as guaranteed annuity rates?

Some schemes offer safeguarded benefits, such as annuity rate guarantees.

An annuity provides a regular income at retirement. With a guaranteed annuity rate (GAR), you can secure a much higher annual income than you would typically get.

You may lose that perk when you transfer a pension with a GAR. If you are unsure, speak to an expert who can advise you based on your situation.

Are there any transfer or exit penalties?

Pension providers may charge a fee for leaving or transferring your retirement pot. It’s important to know what charges and fees apply, as these can eat into your pension savings.

Find out if pension consolidation is the right option for you

Whether you should consolidate your pensions or not will depend on several factors. That’s why seeking professional advice is essential to determine if it’s the right option for you.

At Holborn Assets, our goal is to help you reach yours. We provide independent, expert financial advice tailored to your individual circumstances.

One of our pension specialists will help you understand all of your pension options so that you can make an informed decision about your future.

Whatever your retirement goals, start planning your future with Holborn Assets. Book a free, no-obligation meeting today and learn how we can help you.