Better off together: could combining pension pots boost your retirement income?
Many UK workers have cash in multiple schemes – should you roll them into one? There are pros and consHow many pensions do you have? In the days of a job for life, many people had
By The Guardian
Many UK workers now have multiple pension pots, and combining them can sometimes reduce fees or make retirement income easier to manage. But the decision depends on what benefits you would give up, because some older schemes include valuable guarantees or tax-free cash rules.
According to the source report, private sector workplace pension saving has doubled since 2012 to 23 million people, largely because of auto-enrolment. Alongside that, millions of people also hold personal pensions and self-invested personal pensions, so some savers now have several pots spread across different providers.
The article says putting pensions into a fund with lower annual management fees can save money over time, and moving money from an underperforming fund into a better one can also improve returns. It also says having everything in one place can make flexible drawdown simpler, because taking money from one provider is easier than dealing with several at once.
There are also risks in consolidating. The report says some pensions come with guaranteed annuity rates, or the right to take more than the standard 25% tax-free lump sum, and those benefits could be lost if a pot is transferred. It also notes that some contracts may protect access to a tax-free lump sum at age 55, even though the normal minimum age is due to rise to 57 in 2028.
The piece says the usual first step is to contact the scheme you want to transfer into, which will ask for details of the pensions being moved. It advises savers to make a list of former employers, the dates worked there and the pension providers involved, if known.