Should I combine my pensions?

Combining your pensions into one pot can make it a lot easier to keep track of your savings. But before you do, there are a few things you’ll want to check. In this article, we’ll explain everything you need to know including the pros and cons of combining pensions and our pension consolidation tips.

Should I combine my pensions?

Recently, combining pensions online has become increasingly popular – helped in part by new, faster electronic pension transfers (take a look at our beginner’s guide on how to combine pensions). Pension providers like Penfold also work as a pension consolidation app - letting you easily bring all your pots from previous jobs together in one place.

However, it’s not always a good idea to combine. You could end up paying more or losing out on some extremely valuable benefits in retirement. Before you dive in and consolidate all your pensions, you’ll want to carefully consider if you’re making the right decision. First, let’s look at the benefits.

Why combining pensions can be a good idea

There are a number of reasons why combining your pension pots into one might make your life easier. Here are a few to think about:

• Less admin: Combining all your pension pots makes it simpler and easier to manage your savings and keep track of your retirement goals. Rather than having to keep track of multiple smaller pots, now you’ll only need to go to one place for a complete picture of your savings. This will also mean far fewer passwords to remember and less paperwork to deal with.
• It’s cheaper: You may be able to reduce the charges you’re paying for pension management by consolidating your pensions. That’s because each pension provider charges a different fee for looking after your savings.
  
  For example, if your £10,000 pension pot was invested for 30 years with 7% growth and a 2% annual fee, your pension would be worth £44,452 at retirement. If you'd used a pension provider with a 0.75% annual fee, this same pot might be worth £64,994 - costing you £20,542 less in
  fees!
  
  You may also find it more cost-effective when you access your pension pot. Some providers will charge you an extra fee to access your money at retirement and this can be pricey. Percentage exit fees are particularly bad for those with large pots – a 1% exit fee on a £100,000 pension would give cost you £1,000 just to access your money. Fixed fees are bad for those with smaller pots. For example, a £50 fee on a £500 pension would represent a 10% reduction on the total size of your pot.
• More choice: Right now, you might be restricted on the number of pension fund choices available. Is your current pension invested in a way that fits your attitude to risk? Do they offer a sustainable or sharia option? Finding the perfect plan for you is another good reason to consolidate pensions.

What to check before combining pensions

It’s important to carefully compare your old and new pension providers before transferring. Before combining pension pots, you’ll also want to think about some of the potential drawbacks. These include:

• Pension transfer fees: First, you should check each pension plan’s fees. Each pension provider will charge a fee for managing your savings - the cost may be higher or lower depending on which savings plan you opted for. There may also be an extra charge when you exit your pension. Make sure you compare the different fees before submitting your transfer request.
• Guarantees and benefits: Some pensions also offer special benefits or guarantees. Defined benefit pensions like these are a little more complicated to transfer and you’ll need to chat with an independent financial advisor before making a decision.

Once you’ve looked carefully at your current plan and weighed up the options, you’re ready to transfer your pension.

At Penfold, we do all the hard work for you. We can transfer all your pensions completely free – no matter how many you have, how small they are, or what provider you’re with. We streamline the entire process to make transferring a doddle. It’s entirely online, requires no paperwork, and should only take 5 minutes. If you want to transfer existing pensions to Penfold, simply create an account and request a transfer today. We aren’t currently able to accept defined benefit pension transfers.

It’s important to compare providers’ fees & any guaranteed benefits when deciding on whether to transfer, and be sure that the investments available are suitable for you. We cannot accept defined benefit pension transfers. If you decide to close your Penfold account and the value of your pot has gone down, the amount returned to the provider may be less than what you originally transferred.

Please know that if your employer is paying into your pension currently, transferring that pot may mean you lose out on their contribution. For more information on the risks see here.