Combining pensions in one place can reduce administrative costs and be more economical.
But it’s not always advisable because you may risk losing valuable benefits by abandoning an old plan. You may find it worth accumulating some old pensions, but leaving others alone.
Here’s what you should check before making a decision.
1. Commissions on old and new pension plans
You should check the charges as they can seriously affect your future returns.
2. Where are your pensions invested?
Past performance is no guide to the future, but you should investigate where your money will be kept. Read our guide to carrying out an investment checkup.
3. A private provider versus your work scheme
Pension consolidation companies have emerged to help people manage all or most of their pensions in one place, and this can be cheaper and more convenient.
However, it is likely that your current work plan has also used your scale to negotiate lower rates.
Incorporating your previous pensions into your current workplace pension could be the most practical option, especially if you want to reduce administration.
4. Guaranteed annuity rates
If these are high, it may be worth keeping an old pension and using it to buy an annuity.
You must receive paid financial advice to transfer a pension worth more than £30,000 with a GAR attached.
5. Guaranteed profitability of funds
These are rare, but it’s worth checking the fine print to see if you benefit.
6. Larger Lump Sums
Some older company pensions allow you to receive a tax-free lump sum higher than the typical 25 per cent.
7. Large exit penalties
Most default workplace pension funds are trackers with cheap fees these days. If you have an old, expensive pension with restrictive investment options, you might want to weigh the benefits of moving despite the penalties.
Exit fees are capped at 1 percent after you turn 55.
8. Ongoing employer contributions
You’ll receive free employer contributions in your current work plan and you won’t want to lose that cash coming into your fund.
9. Protected retirement ages
It depends on the rules of the plan, so check them, but you may not want to miss the opportunity to access a pension at age 50, especially if you have several others that will come into effect later.
10. Last salary pensions
Outside the public sector, generous final salary pensions that pay a guaranteed income until death, plus valuable death benefits for surviving spouses, have virtually disappeared.
They are the most generous and secure pensions that exist. You should receive paid financial advice if the value of your transfer is over £30,000, which is a lasting protection against making mistakes that you won’t be able to correct later.
> Should you combine your pension funds? Read our full guide
