Combining Pension Pots
Very few of us remain in the same job from school to retirement, and that can result in several different pension pots. Combining them all together can make financial sense, but only if it is handled in the right way.
The best reason to combine pensions is to get better investment performance and lower charges, ultimately leaving you with more retirement income.
Things to be aware of when combining pensions
The downside of combining pension pots include exit penalties, expensive pension advice, or a mistake resulting in higher pension charges.
The path you take with your pension scheme will depend on what type of pension you have. For instance, in most cases it is not worth combining final-salary pension schemes. Always be aware when you are moving a pension scheme of the benefits that you are giving up. You may need a high level of investment return to match what is provided by your pension.
Other types of pensions, such as money purchase occupational schemes or personal pensions may be worth combining into one place.
This type of pension relies heavily on contributions and investment growth to build up a pension fund. By bringing these pensions under one roof, you can benefit from lower charges as well as boosting fund performance. You will also be able to keep a clear eye of your pension performance.
Pension charges
It is worth being aware of exit penalties on any pension contract, as these can be severe. This type of small print can make it not worthwhile to exit a pension scheme. Your pension provider should be able to tell you if you will be charged an exit fee. Another type of charge is a withdrawal penalty, as this can also add up to a very significant fee just for exiting your pension.
Just because you are facing high exit fees, doesn’t necessarily mean you should stay with your pension scheme.
Finding a new pension
Combining a pension pot is an excellent opportunity to get the most suitable pension scheme possible.
It is worth considering what the annual management charges are, how you could save on them, the investment performance of the fund and any future exit fees.
Some pension investors like the freedom to choose their own funds, using self-invested personal pensions.
Combining pension pots is an ideal opportunity to seek pension advice.
Remember, a good financial adviser should make your retirement much easier by finding the best pension investment possible. If you need help combining your pensions pots, please fill in a free enquiry form and a specialist pensions adviser will contact you.
