What To Consider If You Have Multiple Pension Pots

The majority of people will move jobs during their careers and that means a change in employer. Often, when we leave one job and start another, we also leave our pension contributions from our previous employer in their plan and start paying into a new pot with our new employer.

If this happens every time you change your employer, you could end up with multiple pension pots all of various amounts and providing different options when it comes to your retirement.

An article for the Express recently explored the options when it comes to pension pot consolidation, looking at what you can do and how you could combine some of your pensions into one place to make them easier to manage.

Given that many people have more free time on their hands while the UK is in lockdown, it’s a good time to take stock of what you have where, even if you don’t yet want to make any changes to the situation.

The newspaper advised that you first get the details of every pension you’ve contributed to. If you think you paid into a pension scheme years ago but have lost the details, you can use the government’s pension contact details service, or the Pension Tracing Service to find any pots you don’t have details for.

All you need to do this is the name of your former employer or the pension provider, if you can remember.

Once you know what savings you have where, you need to take stock of everything. As well as looking at how much you currently have in your various pots, you also need to look at what fees you’re paying for the management of each pension and how the different funds are performing.

If you’re not sure whether consolidating your pension pots is advisable given your circumstances, or even if you think this is the way you’d like to go, it’s always best to get pension advice in Northampton, or wherever you live, to ensure you’re making sensible choices in relation to your retirement savings.

An independent financial adviser will also be able to give you information about your options when it comes to consolidating your pension funds and help you find the most efficient way of doing so.

There are a number of things to consider before you transfer pension funds from one scheme to another, however.

The newspaper noted that these include whether there are any exit fees on an old plan, what management fees are charged in the plan you’re intending to move your money to, and what the anticipated growth of that pot is.

Among the main reasons why people choose to consolidate their pensions is to save money and to make it easier for them to manage their retirement savings by having everything in one place.

When you’re exploring your options for consolidating your pensions, you also need to consider what type of schemes you’ve paid into. For instance, if you have a final salary scheme it’s usually best not move this money to an alternative scheme.

Older pension plans can also come with attractive benefits, which means it may be worth retaining these too. This is all information that a financial adviser will be able to help you with when you provide them with details of the schemes you’ve paid into throughout your working life.

Earlier this month, Money Observer offered some tips of things to do when you’re planning your pension ahead of retirement.

For instance, it stressed the importance of women claiming child benefit because this gives them a credit towards the qualifying years required to claim a state pension, even if you’re not employed.

As you’re getting closer to retirement, the news provider stated that it’s typically not beneficial to remove money from your pension pot to simply put it in a bank account or standard savings account because often this “could result in you paying too much tax, as well as missing out on the benefits of your pot remaining invested”.

The publication also stated that, if you have defined contribution (DC) schemes with a value of less than £10,000 it could be worth taking these as small pot lump sums. It explained that the first quarter of any pot is tax free, with income tax payable on the remainder.

You need to be over 55 to take a small pot lump sum and you can do this up to three times, it added.

Pension planning can be confusing, especially if you do have multiple pots dotted between different employers. It’s important to seek advice specific to your circumstances before making any decisions to ensure that you’re making the best-possible plans for your retirement.