Our pensions will be the most important investment we make over our lifetimes, and consolidating your existing pots into one can be a great way to understand exactly how much money you have set aside for later in life. But how easy is it to combine pensions if you’re one of the many Britons who have a long career history?
When you’ve worked in more than three jobs in the past for different employers, pension schemes and various providers can become difficult to keep track of.
This can become a big challenge if you’ve had a long career, especially because providers have a habit of changing names and ownership over time.
Despite this, consolidating your old pensions can make managing retirement easier if you’ve had multiple past jobs. However, there are plenty of important considerations to keep in mind, too.
When combining your pensions into one pot, you must not only locate your old pots but also take a long, hard look at the benefits that each pension provides, because consolidating could mean that you lose out on these perks.
With this in mind, let’s take a look at the key steps you need to take to consolidate your old pensions in an effective way to make the most of your earnings:
1. Track Down Your Old Pensions
The first step to take is to locate your old pensions. If you’ve had three or more jobs, it’s likely that you’ll have more than one pension to find.
Fortunately, tracking your old pensions is fairly straightforward, and if you have your National Insurance number (which can be found on your old payslips) and can remember the dates and names of your previous employers, you can use government portals to find your pots.
You can use the official GOV.UK Pension Tracing Service to help you find the contact details of your former workplace pension administrators.
2. Take Stock of Your Pots
Locating your old pensions is usually the hardest part of the consolidation process, but that doesn’t mean you can rest on your laurels after the first step is complete.
Before deciding to move your old pensions into one single pot, contact each provider to request a ‘transfer value’ for each of your pensions. This can help you to understand how much money you have saved in your old pots.
Consolidating your pensions is a good idea, but only if it makes financial sense for you to do so. This means that if your old pensions have exit penalties payable, it might be worth thinking twice about moving them over.
Another very important thing to keep in mind is guaranteed benefits. Some pensions, and particularly older pots, can contain valuable perks like Guaranteed Annuity Rates (GARs) or protected tax-free cash. These benefits can be lost when you consolidate your pensions, meaning that they’re better off being left alone.
Another thing to keep in mind is pensions that offer defined benefit schemes (final salary), where old employers offer a guaranteed income based on your salary. If you’re unsure about whether your pension has a defined benefit scheme attached to it, the best option is to avoid touching it. If the value of this type of pension is higher than £30,000, you’re required by law to take regulated financial advice before transferring.
3. Choose Your New Provider
You also need to know which provider will take care of your brand-new consolidated pension pot. If you’re unsure of where to start, there are a few commonly used options to consider.
Many workers opt to consolidate their old pensions into their current workplace pension. This means that you can combine everything into a single pot that will continue to benefit from employer contributions, which can help to improve your access to compounded earnings over time.
Another option is to use a Self-Invested Personal Pension (SIPP) provider, which can provide a more complete level of access to investment options. SIPPs can either be entirely hands-on or managed on your behalf, and picking a provider that has a proven track record of high performance and keeping funds secure can be a particular advantage.
4. Begin Your Transfer
Once you’ve chosen your new provider, they usually pick up the slack of getting your old pensions consolidated into a new pot. Simply provide them with your old policy numbers and provider names, and they’ll communicate the changes to the relevant parties.
In total, this part of the process can take between two and six weeks per pension, and if you’re unsure of anything, there are great government portals like MoneyHelper, which provides free, unbiased advice to assist you with your decisions.
Consolidating with Confidence
The workplace pensions we’ve accumulated over the years are the key to our retirement, so it’s essential that you have a good level of visibility over the money you’ve accumulated to better plan your financial future.
Once you’ve completed the steps laid out here, you should be sure to check that all of your transfers have successfully gone through before relaxing and watching your pot grow.
With the help of compounded earnings, a consolidated pot has the potential to assist you in a happy and healthy retirement, and there’s no time like the present for getting your ducks in a row and having a complete pension to nurture over the years ahead.
