Across many jobs and careers the idea of a ‘job for life’ and a pension to come along after is a thing of the past. It’s now more likely that most people will work in many jobs in different roles across a six-decade time span. With each job change, a new pension will be set up by your employer – and that can mean leaving a trail of many small pots of pension money behind you as you move from job to job. Rather than keeping track of many different pension pots, it might make more sense to consolidate them so that when the time comes you have all the money owed to you in one place.
Anyone who has paid 10 full years of National Insurance (NI) contributions is eligible for a state pension, however you need to have made 35 years of NI contributions to be eligible for the full state pension, currently £175.20 per week.
Since 2018 every employer has legally had to make extra contributions to an additional pension scheme for each worker. Before then some employers also chose to make payments even though they weren’t legally made to. This means that if you’ve had more than one job since 2018 you will definitely have these pots of money hidden away waiting for you. This will also be the case though if you’ve had employers pre-2018 who put money aside for staff pensions. Unfortunately, these don’t switch over automatically so it’s worth checking out even if you’ve worked for a few different employers before 2018.
In order to make it easier to track what’s been saved and how much it’s growing it might make sense to bring them together into one place. That could either mean putting them into one of the pots that has already been set up or finding a new private pension scheme to ask any current and future employers to contribute to.
What are the advantages of consolidating your pension?
- Being able to choose competitive pension fees, rather than multiple varied fees
- This will mean saving more money and having a larger amount in one place to earn interest from, meaning you will hopefully be more comfortable in old age
- Only having one scheme to keep track of
What are the disadvantages of consolidating your pension?
- Some pensions schemes have exit fees, meaning that in the short-term you lose money when you take it out to put somewhere else
- If some of your existing schemes have added benefits, you would lose these by removing your pension from them
- It can be a bit of a time-consuming job to consolidate your pension
How to consolidate your pension
The first step is to find and provide information about all previous pension schemes in your name, including details like the providers and your personal policy number. This might be easy to find if you’ve kept old paperwork, but for many it may be a case of using the government’s portal to find your lost pensions.
The only thing you will need is the name of your previous employers. The portal will then show the name of the pension scheme the business is signed up to. You can then contact the pension provider to see whether you are, in fact signed up and notify them that you want to switch provider into your chosen scheme. Depending on the scheme you want to place all of your pension into, many do offer to assist you with this process as an incentive to choose them – so shop around!
This can be a long process and the earlier in life we get to grips with where our pension is being paid into, the better – not least because it will mean ending up with the full amount of money in retirement that we’ve earned throughout our working lives!
There’s no easy answer when it comes to transferring pensions, but putting in the time as soon as you can means having more access to the benefits of a healthy retirement.
Convinced? Make sure you seek out free advice from these services before you begin:
The Money Advice Service
The Pensions Advisory Service
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