Should I consolidate my pensions? 3 important factors to consider

Should I consolidate my pensions? It’s a question you may be asking yourself, especially as recent research by Scottish Widows suggests that merging your pensions could reduce their costs.

This is because some pensions could be more expensive than others, and having many different schemes might also mean you’re paying several sets of charges unnecessarily. Merging to one scheme might reduce costs and, as a result, could expose your retirement fund to greater potential growth.

That said, care should always be taken as you may already be in a fund with competitive charges, and a cheaper pension scheme may not always be appropriate.

Aside from costs there are other reasons having several old pensions may not work in your favour. For example, consolidating might make it easier for you to manage your pension and track performance.

One reason many people don’t consolidate their pensions though, is that they have lost them. According to Scottish Widows, more than 3.6 million Brits don’t know how many pensions they have or how to locate them.

This dovetails into a report by the Guardian, which reveals the total value of Britain’s lost pensions is estimated to be £19.4 billion. Small wonder Scottish Widows also found that 72% of those questioned are in favour of a system that would automatically consolidate pension pots when you move jobs.

Until this happens though, speaking to a financial planner to merge your old pensions might be a good move.  Read on to discover why.

1. You could reduce your pension costs by consolidating

Older money purchase pension schemes could come with higher charges, which may reduce the value of any growth and significantly reduce the size of your pension pot when you decide to retire. As such, they’re likely to provide a lower income in retirement and could put the lifestyle you planned at risk.

Transferring to a less expensive pension fund could reduce fees and help provide greater growth potential. This could result in your pension providing more income in retirement, or you might reach the level of income you need more quickly.

That said, don’t assume that consolidating your pensions automatically reduces costs. You could already be in a pension with less expensive fees, or maybe a cheaper alternative is not appropriate for your circumstances.

This is why it’s important to speak to a financial planner. They will clarify the costs associated with your pensions and any possible alternative, and provide reasons why you may, or may not, want to consider a cheaper alternative.

They will also help ensure the proposed pension is right for you, and check the level of potential growth your existing pensions offers will not reduced by moving it.

2. Consolidating your pensions could make them easier to manage

As keeping track of several pensions can be time-consuming and complex, consolidation could make it easier, as you’ll have less funds to monitor. This could make it easier for you to track performance and the fees your pension providers are taking.

Working regularly with a financial planner in the future also means you can monitor whether your retirement plan is on track. If not, the planner can provide alternative options to get your retirement fund back on course.

3. Consolidation could ensure the right level of risk

When you initially took out your pensions in years gone by, one of two things may have happened.

Either your contributions were put into a default fund by the pension provider, or you chose an exposure to risk you were happy with at the time.

In the years that have passed, the amount of risk that is suitable for you may have changed, although the risk profile of your pensions typically won’t have. As such, you could be in a high-risk fund that exposes you to too much potential for loss, or a low-risk fund that does not expose you to enough growth potential.

Part of the consolidation process with a financial planner is to determine the right level of risk for you. This provides peace of mind that your pensions will be in a fund that’s appropriate for your aims and circumstances.

Please remember, exposing your pension to more risk should not be done lightly, as you may get back less than you initially invested.

A financial planner can help you find your pensions

If you are wondering “should I consolidate my pensions?” always speak with a financial planner before going ahead. Switching and consolidating pensions can be time-consuming and complex, and may result in a decision you later regret if you do not take advice.

One reason for this could be that your existing pension has certain guarantees, such as a tax-free lump sum greater than the typical 25% or a guaranteed annuity rate. You may not want to lose these perks.

This is why planners will always provide a clear explanation of the type of pension you have, where it’s invested, the fees and the levels of growth it’s enjoyed, and whether consolidating it is right for you.

Get in touch

If you would like to discuss your retirement plans and pension, please email me on or call my office on 01793 766 123. Alternatively, call my mobile on 07525 177 046.

While I offer high standards of service and will work with you to ensure any plan is right for you, I’m also a busy mum, so work Mondays and Tuesdays only.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

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