Pension Consolidation

There are several benefits to consolidating your pension. Amongst others, some of the main advantages include the freedom to choose a provider and a higher potential for return. It is not just easier to manage a pension when it is in one place, it is also financially beneficial if the new pension pot has lower costs. 

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However, there are numerous factors to consider when combining your pension, including whether you are in a defined benefit pension scheme or if they offer Guaranteed Annuity Rates. An FCA regulated financial adviser can discuss your unique situation, then advise you on which course of action is best for you.  

What is Pension Consolidation?

Consolidating pension pots is defined by collecting your retirement savings into one pension scheme, to ensure that your fund receives the best benefits. Over the course of someone’s career, the average person will have between 10 and 15 jobs, making it easy to lose track of previous pension pots that get left behind. Each provider will offer different investment benefits, so combining your pension into one profitable fund can increase the reward. Put simply, the more you have the more you will make in return.  

A common question I get asked is "what is pension consolidation?". When we change jobs and turn our focus to new employment, our pension savings are usually at the back of our minds. However, when you come to retire it can be difficult to collect all your different pension pots.  

Working out the best thing to do will depend on a number of factors, including what type of pensions they are, how much they are worth, how well they are being managed, and whether they currently have any special guarantees attached.

I can help you devise a pension consolidation plan based on your investment goals and living standard for retirement. With many options available, finding the best UK pension schemes can feel impossible - but I am here to help. 

To discuss how a pension consolidation can benefit you financially, contact Michael Reed Wealth Management today. 

Should I consolidate my pensions?

Reasons to combine your pensions may include:

  • Lower Fees
  • Achieving better performance
  • Easier administration to keep track of your pensions
  • Less hassle of dealing with multiple providers

Can I save money by combining pensions?

Every pension you own has its own annual management fees. A management fee of 1 per cent can reduce the total size of your pot by more than 20 per cent over a career. Managing your pension correctly from the start could save you money in the long run.

Can I achieve better growth by combining pensions?

Fund performance is crucial to growing your pensions. If you have several pots, it’s likely that they are invested in different funds with different fees, performance and risk profiles. Achieving growth has to be balanced with the level of risk you are comfortable with taking as the investment markets which your pension is invested in go up as well as down.

Is it more convenient to consolidate pensions?

Facilitating drawdown or purchasing an annuity will be easier to arrange if you only have pension with one set of paperwork.

Combining pensions to keep track of them

If you have moved to a new house or only have paper statements because you worked at a company before the days of the internet, the Pension Tracing Service can help you find the details of an old company pension. It won’t tell you if you have a pension with that scheme but it will get the process started to track it down.

Can I combine my defined benefit pensions?

If you have a defined benefit (or final salary) pension, since 2015 under Pension Freedoms legislation you have the right to transfer it into a defined contribution pension. This is a big decision and the appropriate advice should be taken. These transfers mean you give up an inflation proofed guaranteed income for a finite sum of money which is then invested. For transfer values of Defined Benefit pensions over £30,000 it is a legal requirement to seek independent advice before transferring.

Are my pensions a final salary scheme?

The income won't be affected by stock market falls and in the case the pension scheme becomes insolvent scheme then you are covered by the Pension Protection Fund which acts as a security blanket for members of defined benefit pension schemes that have ‘gone bust’.

Do any of my pensions have guaranteed annuity rates?

Some pension schemes offer a guaranteed annuity rate (GAR), which may enable you to buy an annuity with a much higher annual income than you could purchase on the open market. It may not be clear from your pension documentation whether you have one or not, but by undertaking as pension review this will sense check and audit the specific details of the scheme you have. Having a GAR is usually a good reason not to transfer out because once you transfer you lose the guarantee.

Are there any penalties for transferring?

As part of a pension review one thing I check is whether your pension’s transfer value is the same as its current value. If it is lower, then this may be because there are penalties for transferring. If there are it is necessary to find out how long these penalties last for and the amount of the penalty.

Looking for financial advice?

Contact me today for more information on my financial services. 

T: 01509 277746
M: 07702085589

E: [email protected]


Ratcliffe House, Leake Road,
Costock, Loughborough
LE12 6XA