Should you combine your pension?

Should you combine your pension?

Whilst you may currently be saving for a pension or even have more than one pension, you could be considering the possibility of combining them. 

If, over the years, you have accumulated more than one pension from different jobs, it can prove difficult in keeping track of them and their performance. When looking at combining pensions, it is best to consider the type of pension you have and how many years you have left until you are of retirement age. 

Should you combine pensions if you change job?

Taking the time to closely look into your pensions now could be hugely significant when it comes to retirement. This is because it could result in a higher income or the possibility of even being able to enter retirement at an earlier date. 

However, if you are in a fortunate position where you are in a pension scheme that promises an income-based payout on your earnings leading to your retirement, also known as a ‘final salary scheme’, then it is advisable to keep your pensions as they are currently.

If you are involved in any other pension schemes, it would be very worthwhile to consider combining your pensions.

The impact of charges on your pension scheme

Whilst you may be keen to combine your pensions, it is important to look into any incurring charges and interest to ensure you wouldn’t be paying an increase. When combining pensions, you want it to be beneficial and in your best interests. Therefore, if you are not confident in making such a decision yourself, it would be best to seek advice from a financial advisor, who will guide you on the best route to take. In doing this, you will incur a fee from the financial advisor but it could all be very worthwhile.

What age should you consolidate your pensions?

As you come closer to your retirement, you should see a significant increase in your pension pots. Whilst you may have looked into and considered seeking further advice from a financial advisor, you may feel that doing so would put you at a disadvantage and you will lose out by having to pay them a fee. However, you will have less time to gain back the cost before you enter your retirement.

Furthermore, if you are still not satisfied with your current arrangement, then you can still consider combining your pensions.

At present, you may still have at least 10 years to pay into a pension pot. If you choose to combine your pensions at this stage, you will then have all your money in the one place. This can be beneficial in the sense it can allow you to buy an annuity, where you could look at the potential of swapping your pension savings in order to then receive a lifetime regular income or you could possibly invest into an income drawdown. In doing this, you would be able to take a sum of money out to then use to live on when you reach retirement.

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