The days of being told to stop working one day and pick up your pension the next seem ‘long gone’. Today you have new pension freedoms to decide when and how you retire….
Often, after working for a decade or so, it is not uncommon to have accumulated several pension saving pots. There is no right or wrong time to start thinking about pension consolidation, but you might find yourself thinking about it if you are looking to start a new job or perhaps getting closer to retirement age. In essence, pension consolidation means bringing your pension pots together, so you can manage your retirement savings in one easy, convenient place. Sometimes, it can be difficult to understand whether you would be better or worse off combining your pensions.
There are two main types of pension, Defined Contribution (DC) and Defined Benefit (DB). Defined Contribution pensions (the most common type) are where you build up a pot of money over your working life. Contributions come from you and possibly also your employer, providing you with an income in your retirement. Defined Benefit (or final salary) pensions are company pensions that normally pay you a set income based on how long you worked for the company and how much you earned. They provide a valuable guaranteed retirement income.
There are many things to consider when looking to consolidate your pensions, such as whether your existing pensions have valuable guarantees that you could lose if you transfer out of the scheme; also your current pension may have higher or lower product charges, and there may also be charges to transfer your pension to a new company. Some alternative pension providers may offer the potential for a better investment return than your existing pensions. Also there may be benefit from moving your money to a pension that offers funds with less risk, which may not have been on offer previously. This could be particularly important as you move towards retirement, as you may not wish to take as much risk with the money you have managed to save throughout your working life.
Over the years, you may have paid into a number of pension pots with a number of different employers and providers. Whether you combine them or not is not always straightforward. If you would like help to discuss the options available to you, please contact us.