15th June 2018 at 1:08pm
Most of us change jobs a few times – sometimes a lot more – which probably means collecting a few pensions along the way, too.
Pensions are a great way of saving for the future, but when you have a few of them, it might make sense to think about combining them into one.
Here are some of the key things to consider – to see if it could be right for you:
Check what you’ve got
Before you do anything, check what you already have. And ask your providers to give you up-to-date information on how each pension works (they can be very different). You need to know what benefits and guarantees each one has so that you don’t give up any valuable benefits you’d be better off keeping – that’s really important.
You could make things simpler
Everyone has ‘that drawer’ or box, you know the one with the council tax bill and the MOT certificate in? If your drawer is full of various providers’ pension statements, it doesn’t have to be. Having all your pensions in one place means one set of paperwork and one provider.
Even better, manage your money online and you have one log-in, one password and everything is that bit simpler.
Get to know your savings
Whatever you’ve got in mind for the future, you’ll want know to that you’ve got savings to help you live the life you want. One way to help make that happen is by knowing what you’ve got – and how much more you want to save for. Have a look at our retirement calculator for a snapshot of what you need.
Know what you’re paying
Every pension comes with its own set of charges. So, when you’re working out whether to put them all together, add up what you’re paying. It could work out that you save money by just paying one set of fees which might be lower on a bigger pot of savings.
See how your investments are doing
Having life savings in one place could make it easier to see how your investments are performing. Remember, the value of your fund can go down as well as up and you may get back less than you paid in, so it’s important to keep track.
Find what you’ve mislaid
Don’t worry, losing track of a pension isn’t that unusual, and having a few jobs means it’s more likely.
Our article ‘Tracking down a lost pension’ looks at how to go about finding it with the minimum fuss. Your first port of call should be your pension provider, or you can contact the Government’s Pension Tracing Service.
Look after your loved ones
It can be hard to talk about but … if the worst should happen, you’ll want to be able to provide for the loved ones you leave behind.
Now for the good news: these days, pensions are an easy way to pass your money on, sometimes tax free, to whoever you want. Also, inheritance tax isn’t normally due on your pension savings. Even better: having all your pensions together in one place can make it easier for your provider to know who you want to benefit.
Remember to nominate the people you want to benefit from your life savings (your beneficiaries), as your Will doesn’t normally cover this – and your provider can help you do that.
Manage your money
If and when you choose to dip into your pension savings from the age of 55, it’ll be easier for you to see how much you’ve got when they’re all in one place – and take just what you need, to make your money last.
Before you do anything, get some guidance
If you’re thinking about bringing all your pensions together, don’t rush. While this all might seem like perfect sense, combining pensions will not be right for everyone. There’s no guarantee you’ll get more as a result of transferring.
You need to consider all the facts and decide if it is right for you.
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 exciting to see how much you’re saving for your future. It’ll also be easier to 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, too.
But we’re all different, so do a little research 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.