Knowing what you already have in your pension will help you to understand how far you are towards your retirement target. If you have a lot of different pensions it may be worth considering bringing those all together into one account, but, should you transfer?
The process of bringing all your pensions together is called consolidation. It is often referred to as a transfer and most companies will allow you to do this.
There are a number of advantages to this approach, for example:
- You’ll only have to deal with one provider which could make life simpler.
- If you decide to buy an annuity when you want to take benefits, you’ll only receive one payment each month (if you choose to have your income paid monthly), this can feel more familiar as it will probably mirror how your salary was paid.
- If you’re likely to buy an annuity, you could receive a better annuity rate as your account will be bigger and some companies offer better rates depending on the size of your pension account.
Should you decide to receive an income via ‘flexible drawdown’, having all your pension monies in a single pot will provide a more focused approach to calculating the level of income you could receive.
However, there are a number of issues to consider before you decide to consolidate:
- Making sure there are no penalties if you transfer your account from one provider to another (and this is something that we check for you as part of our process).
- Some companies offer ‘Guaranteed Annuity Rates’ and these can provide a much higher income than today’s annuity rates might offer. Any ‘Guaranteed Annuity Rate’ could be lost if you consolidate your pensions. This is would need checking with your pension provider (and again, this is something we would check for you).
- If you’re in a final salary or defined benefit scheme you don’t need to buy an annuity because final salary pensions aim to provide a known and guaranteed level of cover. If you are in one of these schemes we will discuss with you the implications of moving away from such a scheme. From April 2015, transfers can only be made from funded final salary schemes and only after receiving independent advice.
However, the only way you can fully understand what you already have is to review all of your pension schemes which we will undertake for you as part of our review process.
This is not an exhaustive list of the issues you should bear in mind. If you are interested in consolidating your pension accounts, please contact us to start the process today.