October 5, 2019
The employment landscape has evolved significantly over the last few decades, and changing jobs multiple times before retirement is now very much the norm. Even if you have not had that many jobs, you may still have a number of different pensions to keep track of.
Nearly two thirds of UK savers have more than one pension, and changing work patterns mean that the number of people with multiple pensions will increase.
People typically lose track of their pensions when changing jobs or moving home. The average person will have around 11 different jobs over their lifetime. The Government predicts that there could be as many as 50 million dormant and lost pensions by 2050.
As a result, many people have multiple pensions set up, as they have been automatically enrolled into a new pension scheme each time they have started a new job. The scale of the UK’s lost pensions was highlighted in the latest research carried out on behalf of the Association of British Insurers (ABI). In the largest study yet on the subject, the Pensions Policy Institute (PPI) surveyed firms representing about 50% of the private defined contribution pensions market. From this, PPI found 800,000 lost pensions worth an estimated £9.7 billion. It estimates that, if scaled up to the whole market, there are collectively around 1.6 million pots worth £19.4 billion unclaimed – the equivalent of nearly £13,000 per pot.
If you have accumulated a number of pension pots over the years from different employers, consolidating them could be appropriate. By bringing together all your different pension pots, it can help give you a clearer picture of your financial position, enabling you to make more informed decisions about your retirement savings. Bringing together multiple pension pots could be a sensible move if you have a number of pension pots and want more control over your money or less hassle managing them. You may also be unhappy with the performance of a current provider, the choice of investments offered by them or the high fees.
However, a pension consolidation is not always appropriate. It may not be sensible to consolidate your pensions if you are a member of a defined benefit pension scheme. If you transfer out of this type of pension, you may be giving up guaranteed benefits and potentially taking on greater risk.
Also, if you have a pension that comes with valuable benefits (for example, a pension that allows you to buy a higher income in the future via a ‘Guaranteed Annuity Rate’) or your pension provider charges high fees to transfer to another provider, pension consolidation may not be the right option.
Because there are both advantages and disadvantages associated with consolidating pension pots, it can be a complex decision to work out whether it’s the best move to make, particularly if defined benefit plans are involved – you’ll want to be sure you’re making the right choices. That’s where professional financial advice comes in – and we can help you on your way.
(1) The Lost Pensions Survey includes data from 12 large insurers, covering around half of the defined contributions pensions market.
(2) The Association of British Insurers is the voice of the UK’s world-leading insurance and long-term savings industry.
Transferring out of a final salary scheme is unlikely to be in the best interests of most people.
A pension is a long-term investment.
The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
Pensions are not normally accessible until age 55. Your pension income could also be affected by interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.
The value of investments and income from them may go down. You may not get back the original amount invested.
Past performance is not a reliable indicator of future performance.
Any levels and bases of, and reliefs from, taxation are subject to change.
Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means tested benefits and is not suitable for everyone. You should seek advice to understand your options at retirement.
SOURCE: GOLDMINE MEDIA LIMITED 2019
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