A recent report has found that nearly a quarter of UK adults are unaware of pension consolidation, despite it having huge benefits for some individuals.
The survey results, published by Professional Adviser, confirm that the majority of those who have consolidated found the process easy.
Keep reading for your look at why, and how, you might choose to consolidate your pensions into one pot in 2024.
But first, let’s take a closer look at the survey results.
Consolidation won’t be right for everyone but it’s important to know the option exists
Professional Adviser confirms that 22% of UK adults don’t know that they can consolidate their pensions into one pot.
Brits are expected to have an average of 11 different jobs during their lifetime. And the introduction of auto-enrolment, which has made sign-up compulsory (albeit with the option to opt-out), means that you could easily have multiple pension pots. You might even have some you’ve forgotten about.
Consolidation could be the answer, but it isn’t widely known about or understood. In fact:
- 12% of us are only “vaguely aware” of it
- 21% have heard about it but not in detail.
Among those surveyed who haven’t consolidated their pensions, the reasons given vary, with:
- 25% not knowing how to go about it
- 13% worried mistakes could lower their retirement income
- 8% considering the process too complex
- 8% think it is too risky to have all their pensions in one place.
More encouragingly, a fifth (20%) of UK adults are fully aware of pension consolidation.
The survey found that of those who had already consolidated their pension plans, 77% confirmed the process was easy.
Here are some important factors to consider before you decide either way.
Once you’ve found your lost pensions you might consider consolidating them
Finding your lost pensions will mean that you have full control over your retirement pot. One option you might consider is consolidation. There are financial and non-financial benefits to this but it won’t be right for every person or every pot.
Here are a few pros and cons to consider.
1. Consolidation might mean you pay lower charges overall and regain control over your retirement
The older pensions you hold may have higher ongoing fees, fewer fund choices, and less flexibility in how you manage your investment.
A newer scheme might offer lower charges, a greater fund selection – including ones that align with your values on environmental, social, and governance (ESG) factors – and the option to manage your investment online.
While you’ll likely have to pay a transfer charge, it might be cost-effective in the long run to consolidate all your pensions into this newer scheme.
You might also find that the hands-on approach of a modern scheme, possibly with an online portal and easy access to track your funds, gives you back a sense of control. In turn, this should help you to re-engage with your retirement.
2. One fund value and a single provider could make the retirement process easier
Consolidating all your plans into one pot means that you’ll only have one fund value to keep track of and one set of provider details to remember. This should make the retirement process much simpler.
Taking the time to find all of your pensions – including old ones that you might have lost track of – means that you’ll have all the available information in one place.
You’ll be in the best position to make a fully informed choice that is right for you.
3. Before you consolidate, you’ll need to check for hidden benefits that could be lost
You might find that some of your older plans have additional benefits not matched by newer schemes.
Some occupational schemes might have a guaranteed minimum pension, for example, while others could have guaranteed annuity rates that beat the current best rates across the market. Check for guarantees and death benefits to see if the latter are more generous than elsewhere.
You’ll need to weigh these benefits against the potential losses from high fees or poor fund performance. Remember to factor in the charges for transferring out too.
These calculations can be complicated and won’t always be clear cut but we’re on hand to help. Be sure to get in touch if you need to.
Finally, you might find that larger pots – especially when you take them in one go via a lump sum – could push you into a higher tax bracket. You’ll need to think carefully about the timing of these payments.
Get in touch
If you’d like to make 2024 the year you think seriously about finding your lost pensions and consolidating them into one large pot, be sure to get in touch before you act. We can help you weigh up the pros and cons and decide if it’s the right option for you.
Please email hello@globeifa.co.uk or call us on 020 8891 0711 to discuss how Globe IFA’s expert financial advisors can help you.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
Workplace pensions are regulated by The Pension Regulator.
