Read time: 5 mins Pensions

Reasons to consolidate your pensions

  • Most people now have more than one pension pot
  • Consolidating them into one pot can have many advantages
  • We explain why and how it works

Some interesting research was released recently, which found almost two thirds (64%) of Brits now have more than one pension pot. 1

And the introduction of automatic enrolment into workplace pensions means this figure is likely to grow.

So, it’s easy to see why more and more people are contacting evestor to ask about consolidating their different pensions into one pot.

Whether you have pensions worth £1,000 or £100,000, we can tell you honestly whether you’re better off consolidating, or staying where you are.

That’s a service that a traditional Financial Adviser could charge hundreds or even thousands of pounds for, but which evestor offers for free.

Every person’s situation is different, so the advice we give will be tailored to them, but it’s useful to think about some of the arguments for and against pension consolidation.

Here, evestor financial advisors Hayley and Will explain why you might want to consolidate your pensions, and what the process is.

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Advantages

There are a few strong reasons why consolidating could be right for you.

Hayley said: “Probably the biggest potential advantage of consolidation is that every pension provider charges fees, so consolidation can be cheaper - because you only have one pension pot, you only pay one set of fees.

“The amount of fees you pay can be one of the biggest factors affecting the long-term growth of your pension.

“With modern pension providers, you can also track the value of your pot online and see how it is performing at any time.

“And pensions taken out many years ago may no longer be suitable for your circumstances now, so consolidation is an opportunity to get advice and make sure your pension suits your current goals and the level of risk you want to take.”

Disadvantages

It’s worth mentioning that consolidation might not always be in your best interest.

Will said: “If you’re lucky enough to have a pension that will pay you a guaranteed income, you may be worse off if you move your money elsewhere, so we wouldn’t recommend that.

“We’d also always advise you to stick with your current workplace pension, as your employer pays in to that too, and you’d miss out on their contribution if you opt out.

“High exit fees might also be a reason not to move money out of a pension scheme, and it could be that your current arrangements are already well suited to your retirement ambitions and provide good value for money, so there’s no great advantage in switching.”

But, if you do decide to look into consolidating your pensions, what happens next?

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How it works

Hayley said: “First you need to go through your drawers and find your most recent pension statements.

“HMRC has a really useful free service that can help you track down any pensions you may have forgotten.”

With your permission, evestor then contacts all your pension providers to get the details of your current schemes.

Will said: “We use that information to write you a personal report that clearly explains if we think consolidating your pensions with us would be in your best interests, as well as any potential drawbacks you should be aware of.

“It gives an overview of your current arrangements, and the investments we’d recommend instead, based on the information you’ve given us about your personal circumstances and your appetite for risk.

“We’ll include a like-for-like comparison of the fees charged by your current plans versus evestor, so you can see which is the cheapest option.”

The report also considers any extra services your current pension providers may offer, like advice. With evestor you get free advice, but most pensions just offer guidance, which means they lay out your options, but don’t make a recommendation.

The next step

Hayley said: “There’s a lot of work involved, so once we have received all the information we need from your pension providers it takes us about a week to create every report, but it’s free and we’ll only recommend a transfer if we're absolutely confident it’s in your best interest.

“Then it’s completely up to you what you choose to do next.”

We know that consolidating your pensions can appear complicated and intimidating, which is why we’re trying to make the process as simple as we can.

And the benefits can ultimately mean that you have a pension that gives you peace of mind and the retirement you’ve always saved for.