If you have several pension pots, consolidating your pensions can be a good way to get on top of your retirement savings.
People now have an average of 11 different jobs during their career, and will often be enrolled into a new pension at each workplace. This means you may end up with a number of pensions, scattered across different providers, making it tricky to stay on top of them all!
Consolidating pensions into a single plan can help you with this and reduce the stress of managing multiple pots, while also giving you more transparency into their performance and the fees you’re paying.
In this article we’ll take a look at some of the possible benefits of transferring into a single pension scheme, but also mention what is worth bearing in mind. Although we hope this information is useful, we can’t tell you whether or not you should consolidate your pensions: it’s up to you to decide if this is the right decision for you, based on your individual circumstances.
The benefits of consolidating your pensions
Having all your money in one place
It can be difficult to keep track of your retirement savings. Consolidating your pensions means that you only need to keep an eye on one pension, and it can help to reduce the stacks of paperwork you may currently have to deal with, while also giving you a better idea of what your retirement may look like. Having just the one pension to worry about can give you a better understanding of your current pension savings, and allow you to calculate any additional savings you may need to make before you retire.
A pension plan that’s easier to manage
Many pension plans are quite old-fashioned, with providers communicating mainly via post, and offering clunky online portals. In contrast, consolidating your pensions means you can choose a new plan that can be easily managed online. This will allow you to check your balance, make a contribution or a withdrawal, all from one device. This is another way in which consolidating your pensions can make managing your money easier, and put you back in control of your retirement.
Many people move their pensions because they’re looking for a plan that offers a better return on their investment to boost their retirement savings. Only having one pension to look after means you can choose a single plan that matches your appetite for risk, and how you want your money invested. It is always important to read pension factsheets, to see how your money will be invested and how the investments have performed in the past. However, remember that returns are never guaranteed, and past performance isn’t necessarily indicative of future results.
Consolidating your pensions can not only make it easier to monitor the administrative fees you are currently paying, but could also help to reduce them. Many providers make their fees look lower than they actually are by sneaking extra charges like investment charges, contribution fees and inactivity fees into the small print. If you combine your pensions into a new plan, you may be able to save money on these fees - which could be eating away at your old pensions.
PensionBee only charges a single annual management fee, with no hidden costs. Plus, if your pension pot size is larger than £100,000 we’ll halve the fee on the portion of your savings over this amount. The only time you’ll pay anything extra is if you transfer to us and take your whole pot within 12 months, when a full withdrawal fee of £480 will apply.
Things to check before you consolidate your pensions
Along with the pension management fee, some schemes (especially those started before 2001) may charge you an exit fee if you want to move your money away from them. The fee will usually be a percentage of your pension savings, although if your pension is in a ‘with-profits’ fund then your exit fee may come in the form of a Market Value Reduction (MVR).
It is always important to check with your pension provider about any fees you may be liable for, before deciding to transfer your pension. PensionBee will always tell you if we find an exit fee above £10, however not all providers will do the same. As a pension is a long-term investment, you may still decide to transfer your money, but it is always worth giving this some thought before doing so.
Some pension providers offer safe-guarded benefits with your pension, which may be lost if you decide to transfer out from their scheme. So, it is always important to check whether you are entitled to any of these, and if you still want to go ahead with the transfer despite this.
If you’re looking to transfer a defined benefit pension, (also known as a ‘final salary’ scheme) and it has a value greater than £30,000, then you will be required to seek independent financial advice before you can transfer it.
Other safe-guarded benefits can include a guaranteed growth rate on your pension, give you access to your pension early and offer you a higher amount of tax-free cash than the norm. PensionBee will always tell you if we find any safe-guarded benefits, allowing you to decide if you still want to go ahead with the transfer.
How to consolidate your pensions
To consolidate your pensions into one single plan, you will need to provide information about your pensions to your new provider. This can be details about the previous provider, a policy number or even the employer name (if it’s a workplace pension). You can usually find this information through any old paperwork you have may have, or by speaking to the provider directly and asking for the information. If you want to combine your pensions into a PensionBee plan, the more information you can give us about your providers the better as this can really speed your transfer up. If you don’t have this information to hand though, don’t worry, as we don’t necessarily need it and you can always add it later in your BeeHive.
Amalgamating pensions into a single scheme can seem like a complicated process, but we try our best to keep it a simple one. You can sign up with us in just a few minutes on our website, or through our app. You will then be assigned your very own BeeKeeper who’ll be on hand to support you with any questions or concerns you may have, and keep you up to date throughout your journey with PensionBee. Get started here.
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.