Consolidating your Pension Pots

Consolidating your Pension Pots: What you need to consider to ensure you don’t lose out

Have you ever considered moving and consolidating your pension to another scheme or provider? There are a whole host of reasons why people might want to do this before they reach retirement. Some are looking for better fund performance, lower charges or better death benefits; others are simply changing jobs.

Most schemes will allow you to move your pension pot to another pension scheme, which could be a new employer’s workplace pension scheme, an open architecture platform pension,  a personal pension scheme, a self-invested personal pension (SIPP) or a stakeholder pension (SHP) scheme.

You don’t have to decide straight away – you can generally do this at any time up to a year before the date that you are expected to start drawing retirement benefits. In some cases, it’s also possible to move to a new pension provider after you have started to draw retirement benefits.

Before taking any action, it is essential you obtain professional, expert financial advice.

Moving to a new employer

When you leave one job to move to another
one, you are treated as having left the workplace pension scheme, but you do not lose the benefits you have accrued. At this stage, you may decide that you want to consolidate your pot to the scheme offered by your new workplace.

But if you are thinking about doing this, it
is important to do it for financial – and not emotional – reasons. It’s crucial that you don’t move your pension pot out of a first-rate scheme simply because you want to cut all links with an old employer.

Looking for
better performance


Some people opt to consolidate their pension because they are in an underperforming scheme delivering poor – or non-existent – returns. If your scheme is performing poorly, you may well want to move your money elsewhere.

But once again you need to ask yourself whether you are prepared to invest your pension pot in higher risk funds to potentially obtain a better return. If you are approaching retirement age, you need to think particularly carefully before making such a decision.  No guarantees are provided regarding the performance of any new scheme and/or any underlying investment funds/solutions. As such, there is no guarantee equal or higher returns will be achieved when compared to your existing arrangement(s).

Seeking out lower charges

You may want to consolidate your pension because your scheme comes with punitive charges which eat into your returns, leaving you with less money in retirement.

Wanting to access a wider range of funds and more flexibility through pension freedoms legislation

At the same time, consolidating your pension may sound like a good option if you want to gain access to a wider range of funds than those offered by your current scheme or to a new pension scheme that provides full pension flexibility under the new pension freedoms legislation such as flex access drawdown or uncrystallised fund pension lump sum (UFPLS).

Think carefully
before making the switch


You need to be careful before moving your pension pot out of certain schemes – including final salary and public sector schemes, such as the nurses’ or teachers’ schemes – as these offer extremely generous benefits which can be hard to replicate elsewhere.

Equally, if you are thinking about moving your personal pension to another provider, you must check that the benefits are not outweighed by any exit penalties and entry charges.

Looking for a strategy to consolidate your pension pots?

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To discover how we can help you build a long-term strategy for your investments, please contact us – we look forward to hearing from you.

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Our approach to financial planning is simple, our clients are our number one priority and we ensure all our advice, strategies and services are tailored to the specific individual to best meet their longer term financial goals and aspirations. We understand that everyone is unique. We understand that wealth means different things to different people and each client will require a different strategy to build wealth, use and enjoy it during their lifetimes and to protect it for family and loved ones in the future.

All of us at Vizion Wealth are committed to our client’s financial success and would like to have an opportunity to review your individual wealth goals. To find out more, get in touch with us – we very much look forward to hearing from you.

DISCLAIMER:

This blog and its attachments or links should not be relied upon as advice, except to the extent that advice is set out in an attached bespoke Suitability Letter. Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change. The value of investments and income from them may go down. You may not get back the original amount invested.Past performance is not a reliable indicator of future performance.