It’s never too early to think ahead, and plan for your retirement, especially when it comes to your pension. Over the years, you may have accumulated various pension pots, if you’ve worked for different companies along the way. You may have been employed by up to 10 companies during your career.
If this is the case, you’ll likely have enrolled automatically into the company’s pension scheme, each time you started in a new role. This can make it easy to forget the number of pensions you have, or the type of plan they follow, as well as make it harder to monitor each pension’s performance.
You might consider combining all your pensions to make it more efficient. It will also give you an overview of what savings you have available for retirement.
In this article, we’ll explore what it means to consolidate your pensions, and the benefits it may have for your financial plan and retirement goals.
How does consolidating your pension work?
Pension consolidation is simply the act of combining funds from various pension schemes or pots into one. These funds can come from your personal pensions or previous work.
While this can seem like a smart decision, you need to consider other factors when combining your pensions.
- Type of pension you are eligible for
- They are valuable for how much
- When they’re managed properly
- What special guarantees are they covered?
It’s important to consider both the pros and cons of consolidating your pension, so that you’re making the most of your savings, and aren’t liable for high costs of transferring from one to another.
It can also be a lengthy process, and you’ll be out of the market for this amount of time, which is another factor to consider.
What is the best time to consolidate pensions?
Transferring your pensions to one is a decision that will depend on your particular situation. However, there are common situations when this can work out well.
A pension specialist can help you decide how to combine your different pension pots.
You may prefer to be less involved and have more control over your pension provider’s money management. It may be easier to keep all your pensions in one location.
A pension transfer can also be beneficial if you’re unhappy with your current provider, the choice of investments made, or if you believe the fees you pay are too high. You can save money or get better growth by combining your pensions.
There are disadvantages
Consolidating your pension funds has many advantages, as well as some drawbacks. To transfer your pension, you may have to pay high exit fees. This may make it difficult to justify the expense.
Also, it is worth checking whether the current pension plan you are using has extra features like early access and guaranteed annuity rate, as well as the possibility of withdrawing more than 25% in tax-free cash. If you move your pension to another scheme, these benefits will likely be lost.
What should I do if my pension pots are combined?
The best way to retire is to start planning for the future. Your future income can be significantly affected by investing in the correct pension fund.
Moving pensions is not always an easy process. You should make sure it’s the right choice for you. Therefore, it’s a sensible idea to seek expert advice when planning for your retirement, such as consulting with an adviser from Close Brothers Asset Management, for example.
Keep in mind that investments and pension funds can be worth less or more than they were when you first invested. This article does not constitute an offer to sell or buy securities. It also doesn’t make any personal recommendations. Tax benefits may vary depending on how your tax situation is. Rules are subject to modification.
You can create a custom plan to protect your retirement savings with the assistance of a pension specialist or financial advisor. This will be based on your financial position and future plans.
Entrepreneurship Life published the article How to Consolidate Your Pension Pots.