Combining, or consolidating, your pension can make managing your pension funds much easier as well as reduce the amount you pay in annual charges.
In some cases, however, it could be detrimental to combine your pensions as transferring out of certain schemes would mean giving up benefits that are valuable to hold on to, such as a guaranteed income from a set age.
So, it’s a good idea to first look at the type of pension schemes you have before making your decision.
Why should I combine my pensions?
Having your savings all in one place can make them easier to manage. It is very common for most people to have multiple pensions and combining them makes keeping track of your money much simpler.
Combining your pensions could also mean reducing the charges that you pay, leaving you better off when you reach retirement. For example, let’s say you have two pension schemes that work in the exact same way. One charges 3% in annual fees and other charges 1.5%. Transferring all your pension savings into the scheme with a lower fee means you will be cutting the amount you lose each year in half, giving your pension pot more space to grow.
What pensions can I combine?
You can combine any personal pension and most workplace pensions. If your workplace pension is a final salary pension, then you will need to think carefully about transferring out of this scheme. This is because they hold valuable benefits that are best to hold on to.
There are a few types of pensions that cannot be combined. These include the State Pension and any unfunded public sector scheme which covers organisations and professions such as the NHS, teachers, armed forces and the police.
Do I need to transfer my pension to a new scheme?
In some cases, you could be better off by transferring the savings from each of your pensions into one, new scheme. Often there is a better pension scheme on the market that has lower charges and a history of higher performance. Combining your pensions into a better scheme rather than sticking with what you’ve got could leave you in a better position when retirement comes.
A financial adviser can help you find a better pension scheme and often find you a deal with discounted annual charges.
What if I have a final salary scheme?
You should count yourself lucky. This type of pension is highly valuable as it comes with great benefits, such as a guaranteed income from a set age. You don’t have to worry about how your investments have performed or how much you are contributing as your retirement income is already secured.
As this pension is so valuable, it is generally advised to leave your savings where they are. However, we understand that everyone’s circumstances are different. Before making any changes to this pension it’s essential to weigh up your needs and the benefits you will be giving up. Speaking with a financial adviser can help you decide if transferring out of this scheme is the right thing for you.