Could combining your pension pots work for you?

Whether you’re planning to retire in a few years or way down the line, chances are you’ve picked up a few pension plans along the way. On the surface that sounds great, but having multiple plans could mean it’s tricky to keep on top of what you’ve built up.

Combining your pension plans into one pot could be just the ticket and may be a good option for some people. But like with anything, there will be things to consider too.

It’s important to look at both the pros and cons of combining pensions, to help you decide whether it’s the right option for you.

The times they are a changin'

A lot has changed since 2020, with a staggering four million Brits switching careers since the pandemic. A stark reminder that priorities can change, along with career directions to suit our lives.

Even before the pandemic though, the average person in the UK changed jobs every five years, showing the need to keep track of several pension plans is greater than ever. This is where pension consolidation could help to simplify things.

A few benefits when combining your pensions

1. Sometimes it's all about performance

   Considering how many different pension schemes there are, it’s unsurprising that some have better investment options than others. So, it can sometimes be beneficial to combine your pensions to help you take advantage of the opportunities available.

   Poor investment performance is something that can really hamper you in the long-term, especially if you have older pensions that you might not have kept an eye on.

   Essentially, it all boils down to how much your pension grows and how much income you’ll get at the end of the day. So, reviewing your pensions and seeing whether you’d benefit from combining is a good first step.

2. It might be a way to reduce charges

   Each pension plan comes with its own set of charges, so combining them in to one pot could mean you only have one set of fees, potentially saving you money.

   It’s worth checking your pension statements to see what kind of annual charge you’re currently paying. You can also contact your pension providers to discuss this in more detail.

   If you have some older plans, it’s always a good idea to review the charges, as higher charges can eat away at any investment returns.

3. Keeping things simple

   Deep down we’d all like an easy life, and if we’re honest with ourselves, having less paperwork to deal with is a good way to help achieve that.

   So, when you have several pension plans, you’ll have to deal with all the admin that goes along with them. That means updating every provider if your circumstances change. And using different login details every time you want to know the current value of your plans.

   Having everything in one place could make it easier to check your plans and see if you’re on track to meet your goals. It’s also likely to make it easier to understand what your retirement options are.

Reasons why combining your pensions might not be right for you

1. Losing out on perks

   Your existing pension plans might come with special benefits or guarantees that you will lose if you combine. Some types of pensions entitle you to a certain level of income in your retirement, or have valuable guaranteed annuity rates.

   If you do have a pension plan like this, you may not want to transfer it as you could lose money by transferring. For example, if you’re currently paying into a workplace pension scheme, you might lose any active contributions made by your employer if you transfer. A sum that could be significant.

   The best way to check what you could be giving up is to touch base with your pension providers.

2. Check for charges and choices

   Just as you might be able to get cheaper charges and more investment choices by transferring, the opposite can be true too. There’s no guarantee you’ll be better off by combining.

   There might even be exit penalties on your existing policy, which might cancel out the benefit of transferring. Exit penalties could potentially cost thousands of pounds, so it's worth checking if they apply.

   As always, if you're unsure, you should look at getting some financial advice to make sure you understand all the implications.

So, is combining pensions for you?

The decision to combine pensions is completely up to you, but if you do need help, a financial adviser is best placed. You may not know how to combine pensions, but they will go through your pension paperwork with you and liaise with your providers.

This will help build a clear picture of the pension options available to you, giving you clear and unbiased recommendations based on what you want from your retirement.

There is no universal set answer when it comes to combining pensions, which is why tailored advice is so important.

Our Pension Review Service could help

Some conversations can be uncomfortable. But talking about your retirement finances doesn’t need to be one of them.

Whatever stage you’re at, if you’d like help deciding if combining your pension plans is right for you, at Skipton we’ve helped thousands of people plan towards a fulfilling retirement. And our team of financial advisers are ready to do the same for you.

Our Pension Review Service could give you a clearer picture of whether combining your pensions is worthwhile. And help explore how much money you’re on track to achieve in retirement. That’s a conversation worth having.

We’ll carefully review what you have, including any defined contribution pensions from old jobs. This includes checking their performance, future prospects and any valuable benefits they offer.

Where you require advice on existing investments/pensions the minimum value required, including the investments/pensions under review, is £50,000.