Getting ready to take your money? Why it might make sense to combine your pensions

Pensions

MoneyPlus Features Team

11th June 2018 at 3:00pm

When you’re ready to start taking your life savings, you’ll probably want to be able make the most of the flexibility pensions can now offer since pensions freedoms arrived in 2015.

But if you’ve got a few pensions, as many people do, they might not all offer that full flexibility. It might make sense to think about bringing them together into one modern pension that could give you all the options when it comes to taking your money.

We guide you through a few things you need to consider.

So, should I move my pensions into one?

Firstly, it’s worth looking at what type of pensions you have.  Not all private pensions are fully flexible and you could have older-style ones that would give you a lump sum and a guaranteed income for life (annuity), for example, but don’t let you take your savings in a flexible way.

Transferring them into a modern type of pension means you could have fully flexible drawdown which lets you take your money how and when you want from the age of 55, and phase when you take your tax-free cash over a number of years.

This can help you manage your income and how much tax you pay overall in retirement.

But combining pensions will not be right for everyone. You need to consider all the facts and decide if it is right for you. You could lose money by giving up any valuable guarantees or benefits you get from your other pensions or employer.

If you have a serious health condition, transferring may result in inheritance tax charges. There’s also no guarantee you’ll get more as a result of transferring.

Managing your pension in one pot

One pension means you have one provider, one online log-in, one password and one set of paperwork, making it simpler to manage – life can be busy enough.

Keep track of your money – and your spending

Having your life savings in one place makes it easier to keep an eye on how your pension investments are performing and how much you have. And, if and when you choose to dip into your pension savings, it’ll be easier for you to see how much you’ve got to last you as long as you need.

We all want to be as tax-efficient as we can and having one pension could help make managing your tax easier too so that you don’t pay more than you need to.

Passing on your wealth: make things easier

Changes have made modern pensions a great way to pass your money on, sometimes tax free to whoever you want to inherit it. Also inheritance tax (IHT) isn’t normally due on your pension savings, meaning wealth can be passed on down the generations. If IHT is a concern for you, it’s worth taking professional advice on your individual situation.

Having all your pensions together in one place can also make it easier to make sure your provider knows who you want to benefit, you’ll just need to keep your beneficiary nomination form up to date. It’s another reason why you need to know what kind of pensions you have – and be in one that works for you.

What to do next

If you’re thinking of transferring, it’s worth asking all your pension providers to give you an up-to-date statement and information on how each pension works and what benefits they have.

If you’ve lost track of one, you can still track it down, read our article ‘Tracking down a lost pension’ to find out how or contact the Pension Tracing Service.

Knowing what you have and what your other pensions provide will help you decide if transferring makes sense for you.

Get some guidance

It’s well worth taking some professional advice on this – just note there’s normally a charge. If you don’t have an adviser, try unbiased.co.uk, or get some free information and guidance from The Money Advice Service, or read more on our website.

If you do decide to bring your pensions together, it can be pretty exciting to see how much you’ve saved for your future, manage your money and plan how you’re going to enjoy it.

Seeing it all in one place could give you some peace of mind. But remember – do your checks first to find out what’s right for you.

A pension is an investment and you could get back less than you paid in. Tax and legislation may change and the information here is based on our understanding June 2018 and shouldn’t be taken as financial advice. Your own circumstances will have an impact on tax.