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Should I consolidate my pensions?

On average, a worker in the UK changes their employer every five years. Gone are the days of remaining in the same role for decades, a social shift driven by young people entering the workforce with fundamentally different attitudes to work than generations past. Job hopping tends to slow down in times of recession but, on the whole, the number of jobs worked in a lifetime has been steadily on the rise for decades. 

For a lot of people, this means having pensions split across a number of different providers. Businesses will each have a pension provider they use and it is unlikely that, across an entire working life, these will all match up – it’s not uncommon to see people with upwards of five different pensions. With auto-enrolment coming into action in 2012, workplace pensions are accrued but not necessarily engaged with in any meaningful way. 

Consolidating your pension accounts can make keeping track of your retirement savings far less complicated and simplifies eventual access, no matter how far off that may seem. But how can you find out where your pensions are held, and how do you go about consolidating your pots? 

How can I find my pensions?

Making the decision to consolidate is one thing, but locating what is for many a number of different pensions can be daunting. 

Pension providers are also obliged to send members a yearly statement, which might serve as a reminder for a lot of people that those accounts even exist. The problem comes when people, the young in particular, are moving home more than ever before. A large portion of the workforce has had multiple addresses on top of numerous jobs, meaning keeping track of pension plans can appear tricky. 

Luckily, it’s easier than you might think to trace those misplaced funds. In 2016, the UK government launched a Pension Tracing Service, which helps workers locate what the Association of British Insurers estimates is around £19.4 billion in ‘lost’ pensions. That’s about £13,000 per plan.

Why should I consolidate my pensions?

‘Lost’ or untracked pensions make for a real possibility that at least a portion of your retirement savings is languishing in expensive and underperforming accounts. Workers are, however, free to pull all their workplace pensions together into a single scheme for peace of mind and ease of access. 

Schemes vary more than you might think. Old schemes, in particular, are often expensive, inflexible and poorly performing. Newer schemes, on the other hand, make things considerably more straightforward and transparent. 

It may be time to consolidate yours in one place. Not only will charges often be lower, but you won’t have to spend time dealing with multiple different providers. You can have one clear, accessible pension scheme which allows you to contribute directly and get a better picture of how your money is invested and managed. 

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Consolidating your investments can give you access to a greater choice of investments, too. Rather than settling with the providers used by previous employers by default, it can pay to shop around and choose a provider that fits with your retirement goals. 

At Moneyfarm, we’ll give you one-to-one live guidance, an actively managed investment portfolio that never gets stagnant, and a free review of your existing investments to ensure that you’re on the right track for your retirement. We won’t charge fees for transfers in or out, we won’t charge you trading or deadline costs and we offer target-dated and free pension drawdowns

Things to check before consolidating

Consolidation isn’t a silver bullet for the complexities of saving for retirement. There are problems associated with moving pensions around and you should look into the details of yours before you start, though you can easily find out from the provider if any of the points below apply to your pensions.

One of the most common problems, usually found in older legacy pensions, is exit penalties. Newer providers tend to opt for a more flexible system but occasionally heavy penalties still exist for some when a transfer is instructed. Giving up a portion of your pension pot to transfer is a decision for the individual to make, but something to bear in mind if you are contributing to an older pot. 

You might also lose attractive features. Again, primarily associated with older pensions, these include early access, tax-free cash and guaranteed annuity rates. If your pension offers these it is worth considering them before making any decisions about a transfer. 

How to transfer your pension

Transferring a pension is more straightforward than you might think. So long as you haven’t started to take income from them, these days it is rarely much more complicated than compiling some readily available information and actioning a transfer. 

At Moneyfarm, we’ve made transferring to us as easy as possible. When you create a pension portfolio with us, we’ll ask if you’d like to transfer an existing pension to get started. All we need is your provider’s name, your account number and the pension’s estimated value – details you can use the government Tracing Service for if you need to. 

You can input this information online or just through the mobile app. Once you’ve done that, we’ll get in contact with your existing provider to move your pensions over. Depending on the provider, the process takes three to four weeks and it’s all done electronically, which means mountains of paperwork are a thing of the past. We manage the entire transfer process for you, free of charge. 

If you’re interested in transferring your pension or want to find out more about the Moneyfarm pension, get in touch with a member of our investment advisory team or take a look at our website.

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