Pension consolidation: Why you should consider it

OpenMoney Team

September 17, 2019

  • More people than ever now have one pension pot.
  • Consolidating them into one pot can have many advantages.
  • We explain why and how it works.

Some interesting research was released recently, which found almost two thirds (64%) of Brits now have more than one pension pot.[1]

And the introduction of automatic enrollment on workplace pensions means this figure is likely to grow.

Whether you have pensions worth £1,000 or £100,000, we can review your current pensions and tell you honestly whether you’re better off consolidating and transferring to us, or staying where you are.

That’s a service that a traditional financial adviser could charge hundreds or even thousands of pounds for, but which we offer for free.

Here, OpenMoney financial advisors Hayley and Will explain why you might want to consolidate your pensions, and what the process is.

Advantages

There are a few strong reasons why consolidating could be right for you.

Hayley Millhouse, our Head of Advisory Services, said: “Probably the biggest advantage is that some pensions have better investment options than others, so your pot can grow bigger and you can have more money when you retire.

“Every pension provider also charges fees, so consolidation can be cheaper - because you only have one pension pot, you only pay one set of fees.

“The amount of fees you pay can be one of the biggest factors affecting the long-term growth of your pension.

“With modern pension providers, you can also track the value of your pot online and see how it is performing at any time.

“And pensions taken out many years ago may no longer be suitable for your circumstances now, so consolidation is an opportunity to get advice and make sure yours suits your current goals and the level of risk you want to take.”

Disadvantages

It’s worth mentioning that consolidation might not always be in your best interest.

Will Lenehan, one of OpenMoney's financial advisers, said: “If you’re lucky enough to have a pension that will pay you a guaranteed income, you may be worse off if you move your money elsewhere, so we wouldn’t recommend that.

“We’d also always advise you to stick with your current workplace pension, as your employer pays in to that too, and you’d miss out on their contribution if you opt out.

“High exit fees might also be a reason not to move money out of a pension scheme, and it could be that your current arrangements are already well suited to your retirement ambitions and provide good value for money, so there’s no great advantage in switching.”

But, if you do decide to look into consolidating your pensions, what happens next?

How it works

Hayley said: “First you need to go through your drawers and find your most recent pension statements.

“HMRC has a really useful free service that can help you track down any pensions you may have forgotten.”

With your permission, we can then contact all your pension providers to get the details of your current schemes.

Will said: “We use that information to write you a personal report that clearly explains if we think consolidating your pensions with us would be in your best interests, as well as any potential drawbacks you should be aware of.

“It gives an overview of your current arrangements, and the investments we’d recommend instead, based on the information you’ve given us about your personal circumstances and your appetite for risk."

“We’ll include a like-for-like comparison of the fees charged by your current plans versus OpenMoney, so you can see which is the cheapest option.”

The report also considers any extra services your current pension providers may offer, like advice. With OpenMoney you get free advice, but most pensions just offer guidance, which means they lay out your options, but don’t make a recommendation.

The next step

Hayley said: “There’s a lot of work involved, so once we have all the information from your current providers, it takes us about a week to create every report. Our review service is free and we’ll only recommend a transfer if we’re absolutely confident it’s in your best interest.

“Then it’s completely up to you what you choose to do next.”

We know that consolidating your pensions can appear complicated and intimidating, which is why we’re trying to make the process as simple as we can.

And the benefits can ultimately mean that you have a pension that gives you peace of mind and the retirement you’ve always saved for.

Join our mailing list

Thanks for joining our mailing list.

We've sent you a verification email.

Oops! Something went wrong while submitting the form.
Thank you! Your submission has been received!