Stronger together? Why it could be a good idea to consolidate pensions
Imagine if, instead of keeping all your clothes in a wardrobe, you placed them in random piles around the house? Or tried cooking a meal without half of the ingredients?
There’s a lot to be said for being organised and having everything in one place. But when it comes to your retirement savings – that’s not always the case.
Typically, you save for retirement by paying into a pension through your job. But most of us don’t stay with the same employer throughout our career. We move to new companies and pay into new pensions.
May 2021 research by Aegon estimates 6.4 million of us aged between 22 and 65 have lost or misplaced some of our retirement savings. And when it comes to bringing your retirement plans to the boil, that could add up to quite a few missing ingredients.
Should I combine my pensions?
This is a really good question to think about and the answer is – it depends. There are some good reasons why you might want to think about doing it, and other reasons why it might not be a good idea to consolidate pensions.
You could save money.
Always a bonus, especially when every penny gained could boost your lifestyle in retirement. If you have lots of different pension pots, you’re probably paying charges for each one of them. Older pensions tend to have higher costs than they do today. So bringing them together, and paying one fee, could be a worthwhile cost saving.
Combining pensions makes it easier to build a picture of your retirement plans.
When you take the plunge, you’ll need your pension savings to help fund your lifestyle in retirement. So it’s really important to know if you’re building up enough money. And how much income you’re likely to be able to take from it.
If you’ve got different pots here, there and everywhere, working out where you stand is going to be harder.
What about the reasons not to consolidate your pensions?
Some of your pensions might have financial penalties for combining. Probably buried somewhere in the small print. If there are penalties for moving out of an old pension, but it’s not doing much for your future, it might still be worth taking that hit.
But do look before you leap.
Your older pensions might also offer valuable guarantees that would be a real shame to miss out on. For example, if you have a defined benefit or final salary scheme.
There could be some very good reasons to keep your pension pot where it is. But it might not be easy to tell. Especially if it’s an old pension, where you can have easily mislaid some of the paperwork. That’s where the help of an expert financial adviser can support you in making the most of the money you have accumulated.
Combining pensions sounds complicated…
It is. And it might be tempting to think “I’ll just leave it then”.
But consolidating your pensions could offer a significant boost to your retirement finances. And be something you look back on and feel grateful you went through a bit of hassle to look into.
And the great thing is, this isn’t something you need to work out on your own. By speaking to one of Skipton Building Society’s expert financial advisers to review your plans, we could help you to gather a full picture of your pensions and advise you of your options.
At Skipton Building Society, we offer a pension review service. And we’ll do all the research for you. Assessing the performance of your money purchase pension pots and checking if there are any penalties or guarantees. All you need to do is provide us with details of your different pensions. We’ll contact them on your behalf.
You’ll receive an easy-to-follow report outlining the strength of your retirement plans. And your adviser could work with you to develop a strategy towards a more fulfilling retirement. Helping you potentially identify any gaps in your plans that might be worth looking into before you retire.
This is an excellent opportunity to get some informed answers about your future. And for peace of mind you should know there is no pressure to act on our personalised recommendations. Or an upfront fee to pay to hear them. You’ll only pay a charge if you act on our advice and this will be made clear to you before you proceed.
A pension is a long-term investment and your capital is at risk. Your fund value will fluctuate and can go down. You could get back less than you paid in. Your eventual income will depend upon the size of the fund at retirement, future interest rates & tax legislation.