Pension Consolidation

Consolidating your pension offers several advantages, such as the freedom to choose your provider and the potential for higher returns. Managing a single pension pot is not only easier but can also be more cost-effective if the new pension scheme has lower fees. 

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When consolidating pensions, it’s important to consider factors like whether you are in a defined benefit pension scheme or if your current pensions offer Guaranteed Annuity Rates. Consulting with an FCA-regulated financial adviser can help you understand your unique situation and determine the best course of action. 

Pension consolidation involves combining your various retirement savings into one pension scheme to maximise benefits. Throughout a career, it’s common to accumulate multiple pension pots from different jobs, making it easy to lose track of them. Each provider offers different investment benefits, so merging your pensions into one fund can potentially increase your returns. Essentially, the more you consolidate, the greater the potential for growth. 

A frequently asked question is, “What is pension consolidation?” When changing jobs, pensions often become an afterthought, but consolidating them can simplify retirement planning. 

Factors to consider include the type of pensions, the value of each pension, management quality, and any special guarantees. I can assist you in creating a pension consolidation plan tailored to your investment goals and retirement lifestyle. With numerous options available, finding the best UK pension schemes can seem daunting, but I’m 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]

 

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Leicestershire
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