What is Pension Consolidation? And Why Should You Care?

What Is Pension Consolidation?

Few people work for the same company for their whole professional career. Research by Life Insurance firm LV says the average UK worker will change their job every five years*. Due to regulations surrounding auto-enrolment into pensions, this means modern workers could end up with accumulating several pension pots – and the paperwork for each.

Owning multiple pensions can be challenging to keep track of, but these pensions may not be maximising the potential and growth of your money.

For this reason, many people choose to switch all of their existing pensions into one single pension pot that is more suitable and could offer better growth. Merging your personal pensions is known as pension consolidation, or simply, combining pensions. By switching all pensions into one personal pension with lower annual management fees and higher potential investment growth, your retirement fund could become a lot more valuable.

The differences in fees or growth may appear to be small, but over a long-term period, these differences can have a significant effect on how much your pension pot is worth.

Combining Pensions and Retirement Planning

Merging your pensions could help you to get more from the money you have invested (called pension contributions). Yet, it is also beneficial for retirement planning. By being able to track your pension pot in one convenient place with less paperwork, it enables you to understand how much finances you have built up – and helps you plan for retirement.

Those that combine their pensions can quickly identify how much they will expect to earn in retirement and may even be able to hit the fast-forward button on their retirement date. There is also an argument that both younger and older workers can benefit from consolidating their pensions if they want to prepare to buy an annuity; if that is a route that they would like to go down for their retirement.

So, When Should You Merge Your Pensions?

Some people who are already close to retirement may not see the cost benefits to consolidate their pensions due to the cost of financial advice or pension exit fees. With less time to recoup those costs, they sit on their private pensions and accept what they have. However, there are many instances when acting later in your working career can still reap financial benefits and help you plan for a better retirement.

It is always best to seek out professional financial advice to give you the best advice for your specific situation. Thus, there is no right or wrong age to execute pension consolidation. Ultimately, it depends on your circumstances and retirement goals.

Get Personalised Pension Advice from Hilltop Finance

Pension consolidation is an effective method of seamlessly transitioning into retirement, but that doesn’t mean it is for everyone. Some people may not benefit from pension consolidation, and each person should consider their situation thoroughly with a financial adviser before consolidating.

This is why Hilltop Finance only offers a personalised pension advice service for each unique client. As financial advice experts authorised and regulated by the Financial Conduct Authority (FCA), our team only provides bespoke services with real-life financial advice – from real people!

Learn more about Hilltop Finance and our tailored pension assessment services here. Call 0161 413 7051.

• bbc.co.uk, Feb ’17 How Long Should you stay in one job?

Important information: Our website offers information about investing and saving, but not personal advice. If you’re not sure which services are right for you, please request advice from Hilltop’s independent financial advisers. Remember that investments can go up and down in value, so you could get back less than you put in.

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