Should I Consolidate My Pensions?
Published / Last Updated on 09/11/2023
The average person in the UK will change jobs every 7 years. This may mean through you working lifetime that you build up 5-7 different pension schemes via different employers.
Should I consolidate these pensions? The simple answer is: “possibly”.
- For Defined Benefit/Guaranteed/Safeguarded Rights pensions, it is in most people’s best interests to keep their ‘gold plated’ pensions and you should rarely give them up.
- For Defined Contribution/Investment Fund/Money Purchase linked pensions such as personal pensions, SIPPS and workplace pensions, we suggest a review is needed for each scheme to analyse “the good, the bad and the ugly” of each scheme.
Defined Contribution/Money Purchase Information to Compare
- Initial % entry charge? Most newer pension schemes do not have these charges, but older ones may.
- Initial Adviser Fee % charges? Many advisers charge 2-3% upfront. We do not charge these, but charge set fees.
- Ongoing Charges/Platform charges? Usually around 0.3% pa.
- Fund management charges usually around 0.6-1.0% pa.
- Ongoing Adviser Fee charges – usually between 0.75% - 1.0% pa. We do not charge these, but charge set fees (optional if you want ongoing advice).
- Older pensions may still be paying ongoing commissions to the advice firm that you have not spoken to for many years.
- Many pensions may have exit penalties or uncollected initial charges (to cover commissions) which many newer schemes may not have.
- Choice of funds: many older pension schemes have a limited fund choice when compared to newer style pensions.
- Retirement options – many schemes may not offer all retirement options such as annuity, flexible access drawdown, a combination of the two or even phased retirement. We need to compare these.
- Gold ‘nuggets’ – are there any hidden ‘bonus’ items in your pension such as guaranteed annuity rates, terminal/final bonuses or even contractual;/guaranteed interest added each year?
- Economies of scale: Could you get cheaper charges purely because your pensions funds combined would get a discount on charges as the combined fund would be bigger?
Professional Review:
We offer two types of review service that may help you in deciding whether to consolidate pensions or investments.
- Initial Review: A focussed, factual review of each scheme to highlight “the good, the bad and the ugly” of each scheme to identify whether they should be consolidated.
- Pre-Retirement Review: Includes the above but also includes full projection of income, expenses, capital needs and cash flow modelling etc up to retirement age, up to life expectancy and beyond life expectancy to have a clearer view of your current position, ant shortfalls/deficits or even excess income or capital needs in retirement.
Our Fees:
Review Pensions and Investments Pre Retirement Review
Once we have assessed all of this for each pension, we will then put both you and us in a position to decide whether it is value for money and whether it is in your best interests to consolidate pension funds or not.
Should I consolidate my pensions? The simple answer is: “get a professional review first”.
