Should I combine my pension pots?

One of the side effects of auto enrolment will be an increase in the number of pension pots we’ll all have when we come to retire.

Keeping track of multiple pension pots is already a challenge, as research we conducted revealed that 60% of British workers over the age of 21 have had at least four jobs in their lifetime and 12% of over 55s have had more than 10 different jobs.

Pension pot consolidation

As a result, over half of people we surveyed said they have more than one pension pot and 8% have four or more – a figure which rises 25% for those aged over 55. When it comes to keeping track of these pension pots, there is room for improvement, as almost a third confess they don’t know where all their pension pots are!

So if you’ve got lots of pension pots, what should you do?

1.In September, the government announced that it was piloting a ‘Pensions Dashboard’ which will allow savers to view all their pension pots online and in one place. While this innovation is still a little while off and there are a number of hurdles to jump before it becomes a reality, the benefits of having such a tool are obvious.

2. If you have a number of pension pots’, you may be able to save the money you pay on charges by consolidating them. But, before you do this, it’s sensible to get some independent financial advice. Some pensions have built-in guarantees or protections you could lose if you transfer them, so be sure to check. This is particularly true of final salary or defined benefit pensions. While independent financial advisers will charge a fee, making the right decision could save you considerable amounts of money over the long term.

3. If you do want to move your pension pot, be sure to check what the charges are. Some providers will charge you for transferring your money while others won’t.

4. In some cases, having one larger pension pot rather than lots of small ones may be beneficial as it will be easier to keep track of and you’ll probably pay less in charges. But think carefully about where you want to move your money. You wouldn’t want to move your money into a poorly performing fund with high charges for example. Again, speaking to an independent adviser is a good idea.

For free, independent and expert help on all aspects of pension saving you can contact The Pensions Advisory Service.

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