Pensions are supposed to represent a simple way to save for retirement.
However, the presence of multiple pension pots can quickly complicate things.
There is a question of whether to draw them all into one place or keep them separate, so it is worth considering the merits of both approaches to determine what is right for you.
Is having multiple pension pots a good thing?
If you have worked in your adult life and earned above the auto-enrolment threshold, you should have at least two different pensions coming your way in retirement.
The first is the state pension, which is governed by your National Insurance Contributions and the policies of the Government at the time you are set to receive it – it is not something you can control.
The second pension will be your private pension, which is where complications can arise.
Historically, people may have just had one workplace pension to manage, but this is rarely the case anymore.
Moving jobs is more common and each new job will likely see a new pension assigned to you.
Meanwhile, companies can change pension providers while you work for them, resulting in you starting again with a new pot.
Different pension pots have different rates of growth, so having multiple pots to start with can let you see what different providers offer first-hand.
Some pots may have specific benefits, like a final salary pension, so moving this would be unwise – legislation aims to prevent this by mandating financial advice for pension transfers worth more than £30,000.
The benefits of consolidating pension pots
Provided your pension pots do not have unique properties worth preserving, it generally makes the most sense to consolidate them.
Having your money pooled makes it easier to access in retirement and the higher value in the pot will result in more growth when compared to the value if it was spread out.
However, you should be cautious that moving your pensions does not trigger fees that can cut the value of your pot.
Your workplace may have negotiated some reduction in fees that could be void if you move your pension, so getting expert advice is always wise.
Our team can review your pension, no matter how many different pots you have, to determine whether it is worth consolidating your retirement fund or if keeping it separate has any benefit.
To make sure your pension is working for you, get in touch with our team.
