Should you move your pensions into one pot?

Keeping tabs on your old pensions proving a pain? There could be a simple solution.

If you’ve built up a collection of pensions over the years, it can be difficult to keep track of them all. And there’s a chance your money could end up in expensive, poorly performing funds as a result.

So, should you consider transferring them all into one easy-to-manage pension plan? Here are five reasons you might want to think about it:

1. More convenience

It’s much easier to manage one pension than half a dozen. Rather than have to check values with a number of pension providers and schemes, you only have to deal with one.

2. Greater control

Bringing your pensions under one roof can also give you greater control. For example, perhaps one of your old pensions has limited investment choices. Transferring to a single pension could let you cast off these shackles and take greater control. That doesn’t mean you have to pick your own investments if you don’t want to. Many modern pensions also offer ready-made funds matched to your needs, so you don’t have to choose from thousands of funds.

As with most investments, the value of pensions can go down as well as up, so you can get back less than has been paid in.

3. One big pot

Pensions aren’t something many people get too excited about (well, except for us). But they can become a lot more interesting when you’ve got one big pot of money instead of lots of little ones. Once your pension pot is as big as (or bigger than) your annual salary, for example, it could suddenly seem worth paying a lot more attention.

4. Potentially lower costs

Older pensions sometimes have higher charges, so transferring to a modern one could reduce the cost of administration and fund management. And even a seemingly small reduction in the charges you pay could increase your eventual pension pot by a significant amount in the long term. With some pension providers, you may pay less in charges as your pension grows (for example once you have a certain amount in your pot, say £50,000, you might benefit from lower charges).

5. Easier to track and switch

It can be easier to track and switch your investments if they’re in one place. Modern pensions allow you to look online to see where your pension fund is invested and how it’s performing. You can follow your progress and use online tools to see if you’re on the right track for a comfortable retirement.

But don’t dive in without looking first

As you can see, there can be several advantages to consolidating your pensions, depending on your circumstances. However, it’s important to be aware that transferring pensions isn’t right for everyone, and there’s no guarantee that you’ll be better off by doing so.

Before transferring, it’s important to check your current pension/s to make sure you won’t miss out on any valuable benefits or guarantees as a result – and to check you won’t incur any excessive exit fees. An adviser will be able to help you with all this.

You should also be aware that there’s no guarantee that charges will be lower or investment performance better if you transfer, and you could miss out on market growth while the transfer takes place. If you change your mind your pension provider may not reinstate your previous benefits. You should check whether benefits such as your tax-free cash entitlement are comparable with your current pension, too.

We recommend that you speak to a financial adviser if you're at all unsure about what to do with your pension. They can assess your situation and tell you if transferring your pensions is right for you. Please bear in mind that a financial adviser may charge to give advice.

If your pension contains ‘safeguarded benefits’ and is valued at over £30,000 you must get regulated advice before transferring. These benefits typically come with defined benefit (final salary) schemes and schemes that include guaranteed annuity rates. This rule is for your protection, ensuring you’re fully aware of the pros and cons of transferring this type of pension.   

This article is not intended to give advice or a personal recommendation; it’s simply to get you thinking about your options. Transferring your pension or pensions can be a complex decision. If you're unsure whether it's right for you, you should seek financial advice. If you don’t have a financial adviser, we can help put you in touch with one. Call us on 0800 092 31071.