Is Pension Consolidation A Good Idea?

At present, it is more likely that you have several different pension funds. They might be private pensions or occupational schemes provided by your employers.

Now when you are considering revisiting your financial plan, you might like to take a look at pension consolidation.

Since it is a long term investment, for many pensioners it is a dilemma whether pension consolidation is a good idea.

Well, here are a few solid reasons why you should consider your thoughts:

1- It will be easier to manage them

The most common issue people face with multiple pensions is to keep a track of them. By consolidating your pensions, you can easily manage them and view their performance.

You will receive one statement showing your full pension fund and providing complete visibility over your money. If you find out that any of your pension is not doing up to the mark, you can quickly change.

It will save you your time, hassle, and paperwork, as there will be a single point of contact for a pension provider instead of many.

2- It can bring you more profit

Having several different pension pots means you are in contact with several different scheme administrators. They all have different charging structures and differing investment performance.

If you find out the best performing scheme with the lowest charges, transferring all of your existing pensions into that scheme will increase profit to manifolds.

In general, older pensions charge higher. Moving them out into a modern pension can save you a lot of money. Even a small reduction can make a big difference. For example, a minor reduction of 0.5% a year might not seem to be a lot, but over whole working years, it could increase your eventual pension pot by 15%.

3- Consolidation can facilitate flexible drawdown

Before 2015, there was a rule that employees who retire have to use their pension to buy an annuity. However, post-2015, employees were allowed to withdraw their income from their pension pot.

Yet, most of the pensions were not facilitating flexible drawdown, since they started before 2015. Hence, people often get disappointed when they are refused to withdraw their money.

If you wish to take the advantage of flexible drawdown, merging your old pensions into a newer pension is a great option.

4- It can create more scope to improve investment performance

The profit gained from your pension investment is determined by the rises and falls in their value. When you have more options for the investment you get more opportunities to book your profit.

Some old pensions provide access to a limited number of investment funds, which possibly may not perform as expected. On the other hand, modern pensions offer access to thousands of different investment options, creating better scope for improved performance.

Pension consolidation will increase the range of funds available to invest in. It will provide you with more flexibility to select an investment strategy of your choice that gives a better return.



Pension consolidation has its own set of advantages and disadvantages. But for several pensioners with a lot of smaller pots, find it to be a good idea.

Before you weigh the options available around, make sure you deeply check essential factors like valuable guarantees, investment costs, investment returns, investment range, and retirement options. Analyzing these factors will ensure that you have the right plan with you.

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