Combining Pensions: Is It the Right Move for You?

A ‘job for life’ is a rare occurrence in the modern working world, with data suggesting that on average, Brits are enjoying as many as 12 jobs across their working lives, across three or more distinct career paths. This is wonderful, of course, but it can leave your pension situation in a bit of a mess. That’s where combining pensions – taking all your separate pots and merging them all into one – can be of huge benefit. But is it the right choice for you?

In this blog, the financial experts at KGJ are looking at the potential benefits and drawbacks. Before we begin, remember that we give highly personalised advice to our clients based on their exact situation, so this blog is a general overview, not direct advice.

Understanding Pension Consolidation

Wanting to consolidate pensions means taking all your individual workplace pensions from different jobs, and any others like private pensions or self-employed pensions that you may have, and combining the money you’ve saved into one central pension pot. All these different pensions can get tricky to track, especially when you consider the fees, investment options and terms that some of the more complicated pensions may have.

By combining pensions, your retirement savings are centralised, potentially allowing for greater earning power on interest and also making your retirement plans much easier to envisage and manage. While this may seem like a no-brainer at the surface level, it’s worth digging a little deeper into the pros and cons of consolidating pensions before you make your final decision. Remember, it is always recommended to engage an expert in personal financial advice – such as KGJ Insurance – before you make your final decision.

The Benefits of Combining Pensions

First, let’s take a look at some of the potential benefits of a consolidated pension pot.
Lower Fees: Almost all pension pots will have fees of some sort deducted at various points by the pension provider. One pension pot means only one management fee, helping you maximise your savings.

Simpler Management: Trying to manage multiple pensions, even if only to check their balances, can require juggling multiple logins and statements. Staying on top of a single pension is easier and more secure.

Increased Investment Opportunities: Depending on the type of pension you’re consolidating into, the higher value may open up a wider range of investment options. It may also qualify for lower fees or better returns.

Easier Retirement Planning: With all your savings in one place, it’s simpler to track your progress and plan for the future. Even if retirement is years away, you’ll have a clearer idea of how your pension is tracking against your retirement goals.

Modern Pension Features: How long ago were some of your pensions started? It might be worth checking what a more modern pension could give you, such as more flexible drawdown options or improved benefits for your loved ones.

Considerations Before Combining Pensions

The benefits are many but if you’re going to consolidate pensions, here are some potential downsides to consider first.
Existing Guarantees: Some of your pension pots may have certain guarantees – perks, if you prefer – that could be lost if you transfer the value out and close the pension.

Transfer Penalties: Some pensions may charge you for transferring the balance out, and depending on the value of the pension, it may not be worth the charge.

Investment Performance: Have a look at how your pensions are performing. If one is doing particularly well, it may be worth leaving alone and checking again in a few months or years.

Defined Benefit Pensions: Sometimes known as ‘final salary’ pensions, these aren’t as common any more. If you have one, you could lose out significantly by transferring it.

Tax Implications: Large transfers may have tax implications or could push you into a higher tax bracket when withdrawing funds. Understanding this is essential.
We must reiterate that it’s always advisable to take professional financial advice before combining pensions. There are so many different types, benefits and penalties that it can be all too easy to come out worse off.

How to Combine Your Pensions

So, how does combining pensions actually work? Let’s take a brief look at the steps you’ll most likely have to go through.

1. Review Your Existing Pensions: Look at fees, benefits and performance, and decide which ones are worth consolidating.

2. Choose a New Scheme: Are you consolidating into one of your existing pensions? Check this is allowed. Otherwise, you can choose a new scheme to bring all your pots together in.

3. Seek Financial Advice: Once you have your plan, take all your findings and your ideal next steps to a professional financial advisor. Here at KGJ we have decades of experience in dealing with pensions and their intricacies. We always put you at the heart of our service, offering personal advice based entirely on your situation – no external influences. It’s one of the reasons we’ve been around for so long.

4. Initiate the Transfer: Once you are happy to proceed and certain on your choices, your new provider will usually handle the transfer process. Provide details of your existing pensions.

5. Monitor Your New Pension: Keep an eye on your new consolidated pension to see how it performs and make adjustments as necessary to meet your retirement goals.

Make the Most of Your Retirement with KGJ

Bringing all your pensions together under one scheme can reap major benefits, but it’s not always straightforward to achieve. Professional advice is essential to avoid costly mistakes and ensure your decisions align with your goals.

At KGJ, our experienced advisors provide trusted, personalised guidance tailored to you. From evaluating your options to managing transfers, we help you consolidate pensions and maximise your retirement savings with confidence. Ready to simplify your pensions and plan for a secure future? Contact KGJ today for independent advice that puts your financial wellbeing first.