Pension: Should you consolidate your pots? Thousands could be saved but be aware of fees


Pension savings are built up throughout a person’s working life and in the modern office, workers are likely to set up pensions with every employer they work for under automatic enrolment rules. New analysis from Quilter revealed just how many assets a person is likely to have.

In analysing data from the Association of Taxation Technicians and the Pensions and Lifetime Savings Association, Quilter found that the average person works for six different companies during their lifetime, which means they could also have at least six different workplace pensions under their belt.

Quilter found that a person saving for a comfortable retirement could save over £140,000 by consolidating these multiple pension pots into one.

This, they detailed, represents enough for over four years of income for a comfortable retirement.

They estimated that for someone to achieve a comfortable retirement of £33,000 a year, from the age of 65 to 95, a saver would need to accumulate a pension pot of around £500,000.

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Quilter provided the following calculation for illustrating the cost effectiveness of consolidation: “Assuming that someone has six pension pots with six different providers with around £83,300 in each that all charge different annual fees of 1.0 percent, 1.3 percent, 1.6 percent, 1.9 percent, 2.2 percent and 2.5 percent, someone could expect to have £1,076,852 after 20 years if they consolidated them all to the cheapest pot compared to £936,747 if they didn’t consolidate. This all assumes modest investment growth of five percent per year.”

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Ian Browne, a pension expert at Quilter, provided the following comments along with the research: “In times gone by someone may have got a job at a company straight out of school and worked there for the entirety of their career.

“This is now a rarity with most having at least six employers and six different pension pots associated with each.

“Particularly now, thanks to the success of workplace pension schemes, more and more people are putting money away for their retirement but because their pension pots don’t follow them these pots can lay dormant for years with annual charges eating away at their value.

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“With a huge variety of different annual charges seen across the pension industry it is essential that pension savers understand what charges they are paying and whether they can consolidate their multiple pots into the most efficient and best value one as over the long term this can make a material difference to how much they will have in retirement.

“The upcoming pensions dashboard may help users find and consolidate their pots.

“However, figuring out what represents the best pension pot for you isn’t solely down to fees and so it’s vital to get financial advice.

“There are scenarios where consolidation may not be the best course of action which is why professional financial advice is key.”

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It should be remembered that pension consolidation may not always be the best option.

Fortunately, there are many charities dedicated to providing impartial advice to savers to ensure the best financial decisions are made.

Impartial guidance on pension matters can be sought free-of-charge from the likes of Citizens Advice, the Money Advice Service and Pension Wise.

Additionally, the Government regularly keeps their own website updated with the latest legislative changes.





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