First, let me explain what pension consolidation means. Well, this involves adding old pensions into one pot for your future. Please note, you will need to be careful here when you do this. If you do, it is key that you take professional advice.
You may have had several employments through your working life. In turn, you may have paid into several employers’ pension schemes too. If you have, it would be a good idea to think about is pension consolidation.
Tracking down misplaced pensions will make it easier for you to plan when you retire. Please note, if you move them into a single pot, it could leave you better off.
These days, most of us change jobs quite often. What’s more, on average, people will work for at least six different companies over a lifetime. Therefore, this suggests that the age-old idea of a ‘job for life’ is now a thing of the past.
Two examples of when you can lose track
- When you move from employer to employer, sometimes this means you move from a pension scheme to a new pension scheme. It is quite common, though, for people to build up several different pension pots. Therefore, this makes it hard to keep track of these.
A study by Aegon found that, of the 62% of people who have several pensions, more than a fifth (21%) have lost track of one or all of them. That, in turn, equates to more than six million people who have misplaced some of their pension pots. Indeed, 39% of those with several pensions do not know the total value of their retirement savings. Therefore, pension consolidation should be on the `to do’ list for many of these people.
- Today, many people have diverse careers, and this often involves several jobs with different companies. As a result, a majority of people now have more than one pension. What’s more, a number of these people will have lost track of some of their pensions.
It is not easy to plan if you do not have a full picture
It is quite hard to plan for your retirement when you do not have a full view of your savings. What’s more, it is key that everyone has a clear idea of how much their pension is worth. It is key too that everyone has a clear idea of what their State Pension is likely to be when they retire. Therefore, pension consolidation is something a person could think about if they are not sure about their future income in retirement.
When you track down a lost pension, it can be as simple as making sure that any old pension providers have a current address for you. You should write to the pension firm, tell them your new address and ask for a statement. If you are trying to track down a lost workplace pension, you could try to get in touch with the company where you used to work.
Yet, you may find that your old employer no longer exists. You may also find you are trying to trace an old personal pension, and you do not have any contact details. In this case, the Department for Work and Pensions (DWP) has a pension tracing service. Indeed, this can help you find a lost or misplaced pension that you built up many years ago.
Once you have all of your pension data
Once you have found all of your different pension pots, it might be a good idea to think about pension consolidation. That means you bring all of your separate pots together. Then, all your pension savings are in one place.
There can be benefits to consolidation, as many older style pensions are not likely to offer access to the new range of pension freedoms. It could also be a good idea to think about pension consolidation if one or more pension pot has an unsuitable level of equity exposure, or it is languishing in a poorly performing fund.
When you consolidate your pension pots can make it easier to review how your investments are performing. It can also give you a good idea of how much income you will have when you retire. However, it will not be suitable or even available to everyone. Besides, you should carefully consider any decision to look at pension consolidation. You might lose some valuable and guaranteed benefits if you were to transfer out of some pension schemes. Please note this is an extremely complex area, and it is essential that you take professional advice to understand fully what the benefits and risks are before you think about a transfer.
What else should you think about
With so many people losing track of a pension, it is perhaps not a surprise that a high percentage of people are looking into pension consolidation. Indeed, this is even if they have to track down a pension first. However, it is key that people take the time to understand what the pros and cons are of consolidation. It is also key that they are clear on if this is right for them. Therefore, this is where professional financial advice will add real value.
As a final note, you may like to talk to a professional about pension consolidation and discuss if this could be of benefit to you. If this is of interest, please contact Joe on [email protected]