What you should know about consolidating pensions
Here are a few things to consider before you decide whether consolidating pension is right for you or not.
11:21 30 December 2013
If you have more than one pension, you might be wondering about consolidating into one pension account. There are benefits as well as drawbacks to consolidating various pension accounts. Here are some of the things you should consider before making any changes:
- Consolidating into one pension can make life a lot easier for you, and at retirement you would only have to worry about setting up the one payment instead of worrying about multiple accounts.
- Most companies will allow you to consolidate pensions, but you would want to check with all your pension accounts for any restrictions in case your account will not allow consolidation.
- Consolidating your pensions into one account can allow you to purchase a larger annuity, which could increase the amount you receive in the form of monthly income.
- Remember that final salary schemes require you to purchase an annuity, and you may not be able to transfer the funds from other accounts into one.
- Check to see if you have any penalties which might be enforced for consolidating different pension accounts into one. Depending on the cost of the fees, you may be better off keeping your accounts separated.
- If you have “Guaranteed Annuity Rates”, they might be lost if you decide to consolidate your pensions. You also may not receive the type of earnings you would if you kept accounts separate.
There are certainly other factors to keep in mind, but it is perhaps best to consult with a financial professional to find out all the details that are pertinent to your particular financial situation. The basic advice is to make sure you find out all the details before you make changes, and find out if the long-term financial benefits are worth the expected ease of having one monthly payment instead of worry about multiples.