I’ve Got Pensions All Over The Place And Can’t Keep Track. What Should I Do?
We often have clients approach us who, through the course of their careers, have accumulated a number of pension plans. The trouble they say they have is not knowing what the totality of their pension funds are worth and therefore not knowing if they will receive sufficient income in their retirement to live the lifestyle that they wish.
It is sometimes suitable to amalgamate them into one pension plan. A consolidation of their pension plans has a number of benefits:
- You know what your total pension fund wealth is and therefore what income it may provide for you in retirement.
- By knowing what income you may receive in retirement you can determine whether it will be enough for your planned retirement lifestyle.
- You can have a consistent investment approach that will help produce a sufficient fund to provide the income you need in retirement.
- You may be able to pay lower annual charges which will enable you to accrue a bigger fund to provide the income you need in retirement.
- You may have greater fund choice to allow you to maximise returns to accrue a bigger fund to provide you the income you need in retirement.
However, it is not always a straightforward decision. There are pitfalls to look out for.
- Your existing pension funds may have penalties to transfer away. This means you may end up with a smaller fund in retirement and therefore this may result in a lower income in retirement.
- You may have guaranteed annuity rates on your current pension plans. By transferring away you will give these up and so may have a lower income in retirement.
- By transferring away you may be losing guaranteed growth rates which cannot be matched by your new pension plan. This will result in a lower income in retirement.
- If you are a deferred member of a Final Salary scheme, by transferring away you are taking the investment risk and cost of annuity. This may result in a lower income in retirement.
- You may be moving to a higher cost plan because your old plan had special terms. This may result in a lower income in retirement.
- You may have an entitlement to a higher tax free lump sum payment in your old scheme that will be lost on transferring away. This will result in a smaller capital sum when your retire.
So the decision on whether you consolidate all your pension pots is not an easy one to make and you should always consult a suitably qualified expert before you implement a decision that you may later regret.
If you have accrued a number of pension plans that you would like to have reviewed click here.
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