15 Jun Pension Consolidation
Should I be thinking of consolidating all my pensions into one plan?
In our lifetime we go can through several different jobs and with every job we could have a different pension. Having lots of different pensions from your old employers or personal pension can be difficult to manage and keep on top of.
With this in mind it may be beneficial to think about pension consolidation. Putting all your pensions into one would certainly reduce the number of statements you receive and will make it easier to manage.
As an example, one of our clients came to see us; Matt recently left a job at a Bank and was concerned about the number of different pensions he now had.
Matt worked for 3 major banks and in addition to that he had 2 other jobs when he was younger and he was certain that he made pension contributions, however, he could not find any paperwork for the work schemes.
As he started the next step in his career his main concern was that he was accumulating many different pension pots and it was becoming very difficult to manage.
The first thing we did was help Matt to trace the old pensions from when he was younger. We then contacted all his pension providers to analyse each of his pension pots. We looked under the bonnet of each one to find out where they were invested, the fees Matt was paying, and we looked for any guarantees or other benefits that he had, which he would stand to lose if he was to transfer his pensions.
This is important if you are considering consolidating your pensions it is advisable to review each plan. For example, the existing plans may have safeguarded rights, a guaranteed minimum pension (GMP) or guaranteed annuity rate (GAR); some plans also offer more tax-free cash than the standard 25%. These are very valuable benefits that you would not like to lose.
Furthermore, if you have a defined benefit pension like a
‘final salary’ scheme then transferring to a personal pension or similar arrangement will probably not be in your best interest. For Matt we made sure that none of his pensions had a defined benefit or similar guarantees. If Matt’s pension did have guarantees then we would have recommended a Defined Benefits Pension Transfer Specialist who will be able to advise a course of action.
Another issue that concerned Matt was that all his pensions were being managed independently of each other, the different Pension Providers did not know what other pension or investments Matt had and also what his overall risk profile was in terms of his investments.
Matt had a very clear target of what he would like at retirement and felt that by having different investment strategies that were not fully considering his requirements it was having a significant impact on the retirement goals that he had set for himself.
For Matt it was important to have one pension managed in accordance with his overall investment needs and with the targeted returns that were needed to reach the level of the desired pension.
This is something worth considering, as you get closer to retirement you’ll want to be able to invest your pension in a way that suits how you want to access it when you retire.
For example, what will your income look like? Do you need a guaranteed income for all or some of your income or would you be better served to access your benefits more flexibly?
These are all important considerations that you will need to address if you are thinking about consolidating your pensions.
If you have multiple smaller pensions, combining them under one roof could give them the chance to have a bigger impact on your retirement income making sure that you’re on track to retire when and how you’d like.
Before considering any pension transfers, it is vital to check that you will not lose any guarantees or benefits or be charged with excessive exit fees. This is where a good independent financial adviser can add value. The adviser will be able to research each pension plan and give you all the information to make sure you can make an informed decision on what is best for you. By looking at your requirements and factors that are important to you, they will be able to advise on the best course of action. The advice will be based on an assessment of your personal circumstances, tax position, to ensure retirement income methods are based on your personal needs and goals.
Pensions are long term investments, are not normally accessible until age 55, and the tax implications of pension withdrawals will be dependent and based on an individuals circumstances, tax legislation and regulations which are subject to change.
Investment and Pension advice are regulated activities so you should speak with an Independent Financial Adviser. For more information or to arrange a no fee, no obligation initial consultation please contact us..
The value of investments can go down as well as up and so you may get back less than you originally invested.
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Registered in England and Wales. Registration number 11619221.Turner Wealth & Consultancy Ltd is an Appointed Representative of Vision Independent Financial Planning Ltd which is Authorised and Regulated by the Financial Conduct Authority (FCA).