Should You Consolidate Your Pensions?

Back when our grandparents or parents were working a lot of people got a job at 16 and stayed with that company for life. Or if they did money around it would be minimal. And they’d all start saving for retirement from that young age, so when they reached pension age they had a pretty good payout. So there was no need to consolidate your pensions as you only had one or two.

But now it’s quite common for people to switch and move jobs every few years, at least at the start of their careers. This could be to move upwards, for a new challenge, company benefits and culture, or anything else. But it has made the world of pensions a bit more complicated.

When I started my current job I had four different pensions from four companies that I’d worked at over the past 10 years. And that’s not even that many. If you’ve had more than one job, chances are you’ll have more than one pension which can make it harder to manage.

Should you consolidate your pensions?

There’s no right or wrong answer when it comes to consolidating your pensions. I decided to consolidate all four of my pensions into my current companies provider because the amounts I had saved were quite minimal so there was less risk. Consolidating your pensions can help your savings grow quicker as you have a higher amount in one place earning interest/ growth. But there are times where it can go the opposite way. So I’d always suggest seeking financial advice, or arranging a chat with your current pension provider to see what your options are.

How do you consolidate your pensions?

I’m going to be honest I found this process quite long because I started trying to do it myself. You can contact your old providers and request a transfer document. Then you fill this in and give the details of your new pension provider and they’ll transfer it. But for me this took months and I was struggling to get it done. Especially as most of them require you to phone them which is no fun. Plus I’d moved a few times so the first thing I had to do was get my address updated.

But the easiest way to consolidate your pensions is to contact your current provider who should be able to do it for you. All I had to do was tell them who the other pensions were with and which company I’d worked for at the time and they did the rest. I just had to sign a few bits of paper and they did the hard work. Phew!

How long it takes will will vary depending on the type of transfer and how many you have among other things. But the Financial Conduct Authority, said it should take around 16 days.

Positives when you consolidate your pension

There are some benefits if you decide to combine your pension pots including:

• You’ll never forget them– If you have multiple pension pots chances are you’ll forget about one of them when you get to retirement age and you may miss out.
• Easier to manage– If you have multiple pensions it can be challenge. So consolidating your pensions means things are in one place and it will save you time.
• You can choose the best pension– If you have four previous pensions and you want to combine them into one outside of your current one you can choose the best one of the bunch. Perhaps one with the most benefits, or rewards. Obviously there’s no guarantee over time which will perform the best you can make that decision.
• You’ll get more accurate future projections– When all of your pension savings are in one place you’ll get a better idea of how much you’ll have when you retire. Companies will generally use your current savings rate and work out with the estimated investment growth how much you’ll have. This won’t be 100% accurate but it will be easier to look ahead.
• Eliminate unnecessary fees– Most pension pots will come with management fees so if you have multiple ones you’ll be paying multiple fees. By combining them you’ll be paying less fees.

Things to consider when you consolidate your pensions

There’s no guarantee that combining your pensions will yield you the best income in the long run. After all it’s an investment and there’s no guarantee. If you do choose to combine yours be prepared that if you choose the wrong one to keep it can cost you. As mine were all quite small I felt the risk was worth it as I wouldn’t lose as much. But if you’ve got a lot saved get some advice and really think about it before taking the plunge.

Also consider that there may be exit fees which depend on the provider. Take these fees into consideration before opting to move it out and into another provider. But just because a pension has a small exit fee doesn’t mean you should stick around as the benefits of moving might outweigh the fee.

Have you consolidated any pensions? Or have you thought about doing it?

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