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Home > Blog > Pensions > Five Important Things to Consider Before Consolidating Your Pensions.
It’s great knowing that more people are saving for retirement earlier, rather than leaving it to chance. But, with the number of pension policies that people are now collecting, it can be tricky to manage your savings and often, we are forgetting about our smaller pensions when moving to a new job. Consolidating pensions could be an option to make things a little easier to manage.
With all the excitement of starting a new job, meeting new people and the challenges the new role may bring, people could be forgetting about that small pension pot they’d saved up from their previous employer. While it may only be a few thousand pounds, keeping track of it and combining it with other funds, could add up to a tidy sum when retirement day comes around.
Here’s everything you need to know when deciding what to do with a workplace pension from old employers.
You can only access the funds after your 55th birthday.
If you’re younger than 55 years old, no sound and reputable pension provider will let you take money from your pension early (unless in extenuating circumstances). If someone offers to help you unlock an old workplace pension before 55, it’s highly likely to be a pension scam, and you should keep clear of any such offer. You could risk losing all of your money to the scammer, and you may still have to pay a high level of tax to HMRC on top for withdrawing the funds.
You can move or look at consolidating pensions at any time.
Although you might not be able to withdraw your pension funds, if you’re under 55, you can move an old workplace pension, and in fact any personal pension at any time. Too often, people stay with their current provider and trust that their pension is looking after itself and performing as it should when they leave an old job, but this isn’t always the case.
A workplace pension is set-up to benefit the majority of the workforce. Still, this pension may not deliver what you require later in life. That’s why it’s essential to check your pension performance regularly and ensure your money’s being invested within the parameters of your attitude to financial risk. It’s possible that an old workplace pension from several years ago could have slowed in growth or even losing money due to the fees charged by the provider being more than the money your investments are returning. It’s always advisable before deciding on any transfer or combining your pensions to speak with a professional adviser, that’s FCA regulated and preferably independent.
Excessive provider fees can be a big motivator to start considering a transfer.
Management fees can vary massively from provider to provider. We’ve seen different providers charge 0.25% up to 5% or 6%, and, based over a number of years, the value difference between them could stretch to tens of thousands of pounds. It’s concerning to see how much money people are missing out on when all it could take is a quick assessment by a professional adviser and a switch to a more suitable pension. Old workplace pensions are frozen as soon as you stop paying into them. So, instead of provider fees coming out of the new contributions that are being paid in, they’re taken from your balance which can keep going down over time if you don’t keep an eye on it.
Don’t ignore the retirement warning – boost your pension.
Have you checked your pension lately?
As you get closer to retirement, your provider should send you a ‘Wake Up’ pack. The wake-up pack is usually sent 5 years before your anticipated retirement date. It’s advisable to check the value of funds you’ve built up and assess the estimated monthly income this amount could deliver. If it’s looking a little low, compared to your outgoings, are there ways that you could boost this while you’re still employed and receiving an income? Speaking with a pension retirement planner could help you to plan for retirement and find ways that could boost your pension pot in the short term.
Consolidation may not be advisable for every pension policy.
It might not always make sense to combine your pensions. Still, a pension adviser can assess your current funds and offer expert advice on which pension policies to combine, and which would be better off staying where they are.
While transferring all of your old workplace pensions into a single personal pension is one of the best ways you can keep track of your retirement savings, there are some financial instances when it won’t make sense to move an old workplace pension.
Talk to an expert.
When thinking of combining your pensions, it’s always advisable to speak with an experienced and qualified pension adviser, like the team at Hilltop Finance. We can assess all your pensions, check how much each provider is charging you, whether those pensions offer the flexibility you want in retirement. Once assessed, the adviser will deliver an in-depth report and talk through their advice and recommendations on how to improve your current and future financial situation. They will also advise on whether consolidating pensions is a worthwhile option.
For more on consolidating pensions, please click here or call 0161 413 7051 and speak to our team for a free initial consultation.
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