When is the best time to consolidate your pensions?

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Think about how many pension pots you have

In your working lifetime, as you move between jobs you’re likely to build up a number of different workplace pensions. You might also have one or more personal pensions and now’s a good time to make a list of how many you’ve got and where they all are. Count up how many you have – did you know you’re probably paying separate charges on all of them?

It could be now is the time to think about bringing them altogether into one pension pot, this is called consolidation. Consolidation can be a good thing as it can help you save money on multiple charges, give you a clear view of all of your retirement savings in one place and be easier to manage than multiple pots.

Don’t worry if you’re paperwork isn’t as organised as it might because you can contact the pension tracing service to track down a missing workplace pension or The Pensions Advisory Service to find details of a personal pension.   

Once you’ve done this then it’s time to see what consolidating your multiple pensions into one could do in terms of reducing charges and improving performance. You should review your current pension terms carefully as you may have important benefits or features that you could lose when you transfer. If you are unsure, you can discuss your options with our team of experts or you can speak to a financial adviser.

Consolidating early is important 

The longer you leave your pension savings in a scheme with high charges the more they could eat into your money. And, if you aren’t monitoring your investment, you could be leaving your pension savings invested in a poorly performing fund, reducing the opportunity for growth,

High charges and poor performance are a toxic mix and figures from consumer Watchdog Which? illustrate just how much they can impact on the growth of your pension nest egg.

If a 35-year-old with £10,000 in their pension pot stayed invested until they hit 65, achieved 5% annual investment growth and paid annual charges of 2%, they’d end up with £23,720 in their pot.

But, says Which?, if the fund achieved annual investment growth of 7% and had a reduced annual charge of 1.5% then there’d be £48,541 in the pot come the age of 65. That’s more than double and shows why it’s so important to keep charges low and to monitor investment performance carefully. 

Consolidating pensions as you get older

The closer you get to retirement the less time you’ll have to benefit from reduced charges and improved performance. There’ll also be less time to recoup any exit fees you incur from transferring out of existing pensions.

But that doesn’t mean for a minute that you should forget about consolidation and it’s worth analysing exactly how much consolidation would cost, the savings you could generate and the performance of your existing funds. If you’re paying high charges and getting poor investment returns you could potentially make up any outlay for consolidating very quickly.

It’s also the case that no matter how close you are to retirement you need to have complete clarity on the amount of pension savings you’ve got and where they’re invested. As you begin to explore how you could use your pension savings to generate an income in retirement, having a single view of their value is a lot easier than going through the hassle of pulling in valuations for multiple pensions and dealing with numerous providers.

If you’d like guidance on how to consolidate your pension then we can provide this through our Aegon Assist service and if you need financial advice then we can help you find a financial adviser. However you choose to do it, it’s time to think about consolidating your pensions.