Saving for old-age? 5 things to consider when bringing your pension pots together.
If you are one of the fortunate few to have been saving for your pension for some time, you may have ended up in the position where you aren’t quite sure where it all is. Moving employer over the years, changes in your income status or financial stability and you may have ended up with a little bit in various pots all over the place.
So how do you keep an eye on all of these pots at the same time? Keeping track can be tricky and it can be easy to lose touch with your money. Never mind the fact that having it all spread out in various schemes may not be financially efficient. If this is the case for you, it may be wise to consider consolidating your pensions. That is – bringing them all together into one big pot.
Is this a wise move for you? Consider the following for most money purchase private pensions…
- What are your options?
Look at each of your pension schemes. Which have the lowest charges? Which appears to provide a better customer service? Do you benefit from seeing a real-time online valuation? Do you receive ongoing advice in relation to any pension scheme you may hold? Are you paying for ongoing advice that you don’t feel you are receiving? Are you able to switch the underlying investment fund your pension may be invested in? Has your pension provider explained to you how they have adapted your pension in light of new pension freedom rules?
FYI, don’t take pension freedoms for granted, you may not be able to benefit from it because of the type of pension scheme you may be in and therefore it will be important to find out, as it could be a lot more costly to move your pension at a later date if you want to benefit from those very freedoms.
If you do decide to consolidate, there will be a lot of it. Be prepared for that. A good financial adviser will minimise this by taking all the information necessary for him/her to act early on and then liaise with each provider to gather the relevant information about each policy. A good financial adviser will dig a lot deeper than you could, looking at things like asset allocation, overall cost of a portfolio, past performance, pension features, whether the pension includes to attractive guarantees and a lot more.
- One way in, one way out.
So you have loads of pension pots, are you paying in all of them too? You’re probably not and therefore some pots may not be growing as efficiently as they otherwise could. Think of it this way, if you are not contributing into a pension pot you are not buying into those assets that may be undervalued and so you’d miss out when their values increase. Also when you come to retire and want to take monies out your pension pots you will need to negotiate terms with each and every pension provider you have, it could be a right hassle.
There could be fines or exit penalties for transferring funds from one of your schemes and closing it down – so do your full homework on this first. Some providers will have clauses about such things with huge charges. Not just that but you could be in a particular old plan that offers very attractive guaranteed annuity rates, rarely would you want to transfer away from one of these plans.
- Stability and security.
The fact that you are reading this short blog probably means you are somewhat concerned or interested in your retirement, that’s fantastic. The sooner you start contributing into a pension the better, and the sooner you start looking after your pension it’d be even better. You want some form of stability and security not just now but definitely in retirement, but we understand how precious little time we have in giving 5 minutes to everything we are requested to give 5 minutes to. So look, ask you provider the questions that have come up in this blog but also yourself some serious questions about how much income you think you will need in retirement and where you think that income will come from.
Quick point selling your pension for an annuity; which is a lifetime income, today £100,000 pension pot will buy you a lifetime income of £4,925 p.a. at the age of 65, now add that to a full state pension of £8,092 p.a., you get £13,017 p.a. Is that enough for you? Probably not.
Disclaimer: The information contained within this article are provided as illustrative purposes only based on legislation at the time of publication. Nothing in this article should be construed as advice or guidance to one’s personal situation. The value of your investments may go up and down, similarly, other aspects of your wider lifestyle and financial context may impact on your objective. In a nutshell, don’t rely on blogs and the articles for personal advice, and always seek advice from a qualified professional.