How to consolidate and combine multiple pension pots

Nowadays, we are all drowning in pension paperwork. This is because, on average, people have 11 jobs in their lifetime. This means you can end up with several pensions from different providers. 

It can be challenging to wade through papers to see what you have where. Let's be fair, it's not a fun task, so we put it off. 

This is why people consolidate their pensions into one manageable plan.

Pension consolidation combines all or most of your pensions into one easy-to-manage fund.

Pension Consolidation: Why Consider Pension Consolidation

There are several reasons why you might consider pension consolidation:

• Save money
• Better growth
• Keeping track of your pension savings

 

Pension Consolidation: How can I save money and grow better through pension consolidation?

In 2013, the RDR ended commission-based selling for financial services (except insurance). Radically changing how financial services charge fees.

Before 2013, financial advisors were been influenced by using schemes that paid higher commission. Post-2013, the advisor has to charge an upfront fee for his or her advice. His motivation now is to give you the best advice.

With legacy pensions, especially pensions that you took out a decade or more ago. Unless you do something about it, your pension provider could skim up to a third of your investment returns. Due to the high back-end charges to try to recover the commissions paid to the financial advisor upfront. The financial advisor essentially got loaned it. Now, this is either taken upfront or from the principal.*

For example you have a pension pot value of £100,000 growing at 5 per cent a year. Reducing your pension charges from 1.2% to 0.4%. As a result could save you a massive £46,000 over 20 years

Pension Consolidation: Is it more convenient to keep track of your pensions?

Yes, managing multiple pensions can be difficult. However, it is vital to ensure your financial well-being during retirement. 

If you've lost track of your pensions, such as moving house, you might forget about them.

With pension consolidation, you can easily keep track of your investments and reduce administrative hassles.

Pension Consolidation: What about safeguarded benefits, guaranteed annuity rates and defined benefit schemes

Not all pensions can be consolidated, and moving to a personal pension may not be in your best interest.

Due to transferring your pension, you can lose your safeguarded benefits.

Such as guarantee annuity rate, which may be a part of your pension. Which you may lose if you decide to transfer.

Suppose any of your pensions are defined benefits or final salary, which provide a guaranteed income for life. Before transferring, certain conditions need to be met.

Get expert advice

If your pension is over £30,000, and you would like to consolidate your pension. It is a legal requirement to have a financial advisor.

Let Regulated Advice match you with a financial advisor for expert advice.

 

*For example, with a £100,000 pension pot, the financial advisor transfer fee is 2%. Before the RDR, the £2,000 commission went back to the pension company through higher charges. Now, it would be taken from principal, so £98,000 would be invested, but with lower rates. Rates of less than 0.5% instead of the 1% to 2% pension charges.  These costs are recovered quickly, and you are better off over the long run.