Should I combine my pensions?

Combining, or consolidating, your pension can make managing your pension funds much easier as well as reduce the amount you pay in annual charges.

In some cases, however, it could be detrimental to combine your pensions as transferring out of certain schemes would mean giving up benefits that are valuable to hold on to, such as a guaranteed income from a set age.

So, it’s a good idea to first look at the type of pension schemes you have before making your decision.

Why should I combine my pensions?

Having your savings all in one place can make them easier to manage. It is very common for most people to have multiple pensions and combining them makes keeping track of your money much simpler.

Combining your pensions could also mean reducing the charges that you pay, leaving you better off when you reach retirement. For example, let’s say you have two pension schemes that work in the exact same way. One charges 3% in annual fees and other charges 1.5%. Transferring all your pension savings into the scheme with a lower fee means you will be cutting the amount you lose each year in half, giving your pension pot more space to grow.

What pensions can I combine?

You can combine any personal pension and most workplace pensions. If your workplace pension is a final salary pension, then you will need to think carefully about transferring out of this scheme. This is because they hold valuable benefits that are best to hold on to.

There are a few types of pensions that cannot be combined. These include the State Pension and any unfunded public sector scheme which covers organisations and professions such as the NHS, teachers, armed forces and the police.

Do I need to transfer my pension to a new scheme?

In some cases, you could be better off by transferring the savings from each of your pensions into one, new scheme. Combining your pensions into a better scheme rather than sticking with what you’ve got could leave you in a better position when retirement comes.

What if I have a final salary scheme?

You should count yourself lucky. This type of pension is highly valuable as it comes with great benefits, such as a guaranteed income from a set age. You don’t have to worry about how your investments have performed or how much you are contributing as your retirement income is already secured.

As this pension is so valuable, it is generally advised to leave your savings where they are. However, we understand that everyone’s circumstances are different. Before making any changes to this pension it’s essential to weigh up your needs and the benefits you will be giving up. Speaking with a financial adviser can help you decide if transferring out of this scheme is the right thing for you.

4 ways combining your pensions could benefit you

Increased growth

Your pension may not be performing as well as you think. Perhaps your savings are in poorly performing investments and are dwindling away rather than growing. Or maybe your investments incur high charges that are leaving you with very little growth.

Tax-free cash

From the age of 55 you can withdraw up to 25% of your pension fund as tax-free cash. Certain pension schemes don’t allow you to withdraw lump sums. So, transferring your pension to a scheme that does can open up this option to you. Withdrawing pension money early isn’t right for everyone as it will leave you worse off in retirement.

Reduced fees and charges

Making small changes to your pension now could make a huge difference to your future. For example, let’s consider pension provider charges. Typically, these can range from 0.5% to 1.5% per year. We negotiate for our clients a reduced rate of 0.2%. This means your hard-earned savings have more space to grow.

Effective retirement planning

Combining your pensions can also consolidate your retirement provisions. This will give you a better understanding of how much money you can expect to retire with and whether you are saving enough to meet your future needs.

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The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article.
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