There are a lot of different pension types out there and they all have varying rules, features, and benefits. And it is likely that you probably have multiple pensions if you have been employed at multiple different companies. It is important to know how many pensions you have, what level of service you are getting, how they work, and what features they offer. If you are not happy with them then you may want to look into a pension transfer to consolidate your plans into a new pension scheme.
Benefits of consolidating pensions
A clear and simple overview of your pension – having multiple pots can make it extremely difficult to understand exactly how much you have saved and makes managing your income more complicated when it comes to retirement. By consolidating into one pot you will know exactly where you are invested and how much income you can take when you retire.
Potentially greater returns on your investment – modern pensions can give you more options with regards to investments and more opportunity could potentially lead to better returns. So you may want to consider a pension transfer if you have an old scheme. However, there are no guarantees with this.
Less paperwork – you will have less physical paperwork if you move your pension online and less admin to sort through if you consolidate into one pot rather than having to remember multiple logins and calculate totals across different pots. Moving online also means you can see how much you have instantly and make changes in minutes.
Could reduce overall costs – you should do your research as this is not always the case but having just one provider could reduce the fees you pay.
Should I consolidate my pensions?
On average we have about 11 different jobs in our lifetime and with each new employer, you may be getting a new pension with a different provider and different features. When deciding whether you want to consolidate you need to first check what your scheme rules are around retirement age, whether the investment choice you have matches up with how much you are willing to risk, and your financial aims. You should also check what fees you are paying and easy it is to access your pension online.
If you are not happy with any of the above, then it could be worth it to consolidate your pensions and transfer them into one account.
Reasons not to transfer?
If you are part of a defined benefit pension such as a final salary scheme, then transferring your pension to a personal pension is probably not in your best interest. These pensions do not only give you a guaranteed income, but they also offer benefits for your partner or spouse if you pass away.
If you are enrolled in your current employer’s pension plan, then you will not want to transfer this until you leave their employment as it could mean losing your employer’s pension contributions.