Combining your multiple pension schemes into a single pot will leave you with less administration and, therefore, less hassle. Even better, you could end up paying a lot less in pension fees, leaving you more money invested for your retirement.
Another reason to combine your pensions is that it will provide you with the chance to weed out any old or underperforming schemes. At best such schemes may be stagnant, but in the worst case, they may be ruining your funds and threatening your retirement plans.
How could you have more than one pension pot?
If you have frequently changed employment for her to work in life, the chances are you may have several workplace pensions. Employers have been offering workplace pensions for many decades, and from 2012 they had to provide what is known as auto-enrolment for employees aged over 22 to and earning over £10,000 annually.
Auto-enrollment is a legal requirement for all employers. Therefore every employment you’ve had in the past means you’ll have had a corresponding workplace pension. Of course, you will have stopped contributing to such pensions once you move employers, so you may even have pensions that you are unaware of.
How to track down your old pensions
You have two options for tracking down your old pensions, as follows:
- Do-it-yourself via the Gov.UK Pension Tracing Service.
- Use an independent pension tracing company.
Using the government pension tracing service is straightforward. However, there are limitations on the level of information that is accessible using this service. If you don’t want to use the service yourself, plenty of companies are available to help you find your pensions.
Many such companies will use the government pension tracing service to start their search. All you need to do is provide them with some basic employment and personal details.
Before using a pension tracing company, you should fully understand what you are committing to when you ask them to trace a lost pension. Do not sign up for anything you don’t fully understand.
How pension combining can reduce your charges
Your personal or workplace pension we’ll come with a set of fees or charges. Some pension providers are transparent regarding their costs, while others or a little less clear. For instance, you might compare two identical pension schemes from two different providers. One provider may charge you not 0.5% annually, while the other costs you 1.5% per year.
Although 1% may not seem significant, this figure can amount to a considerable amount of money over the lifetime of your pension contributions. Failing to combine these pensions into the scheme with lower fees means you will have less money available for your retirement.
How can you combine your pensions?
If you feel confident enough in doing so, you can combine your pensions yourself. If you are a little more hesitant in dealing with pensions, regulated companies can help you combine pensions on your behalf. These companies will gather the information they require regarding your existing schemes then switch them into a single integrated plan.
However, using pension company companies is not always your best option, and you may want to consider using the services of a regulated financial advisor. They will be able to offer you advice about your pensions and combine them if that is your best option.
Why you should consider a regulated financial advisor when combining your pensions.
An FCA-regulated financial advisor will not only combine your pensions but processes the advantages and disadvantages of each scheme, check out Portafina. They will advise you on your best course of action, helping you make the best decision. This is an entirely different level of service compared to that provided by pension combining companies. The primary aim of these companies is to combine your pensions for administrative reasons, and they will not consider all of the financial aspects of doing so.
Combining pensions to reduce administration and hassle is beneficial, but it may also result in you losing out on other valuable features offered by your pension. Using a regulated financial adviser to combine your pensions will make you aware of these features so you can decide accordingly.
Of course, there is generally a fee involved with using a financial advisor. However, you should not be concerned about such fees as using a regulated financial advisor will have significant benefits in the long term. A recent ILC report demonstrated that those who used a financial advisor, on average, had £30,000 extra in their pension pot compared to those who got no financial advice.
Can you combine your State Pension?
Unfortunately, you cannot combine your state pension with any personal or workplace pensions you might have. The State Pension differs from other pensions because it is a government benefit you will receive at a specific age, having met the required level of National Insurance contributions.