consolidate your pension

Consolidate Your Pensions

Consolidate your pensions

Consolidating all your pensions into one means everything is in one place.

This saves you time when it comes to managing your pensions.

Many of us have an old pension from previous employment.

If you are in this situation, what do you do to ensure you can get the benefits when you retire?

It is important to make sure you are aware of and have located all your pension pots from previous employers and they have the correct address for you.

You don’t want your retirement income information going to the wrong address.

consolidate your pensions

You may have a very valuable pension pot waiting to be claimed. Remember, every €25,000 is worth €1,000 a year in income (assuming an annuity rate of 4pc flat rate, aged 68). Three €25,000 pots all add up.

Have you worked abroad?

Are there previous employers here you keep meaning to contact about old pension pots?

Work practices have changed a lot over the years, but pension rules remain stubbornly rigid, according to managing director of financial advisory company Investwise David Quinn.

He says he routinely comes across clients with four or more old pensions, either from old employment or their own personal pensions, and it is a major headache to consolidate them into one single pension.

Lower charges

And it could mean lower charges. There will be one set of charges instead of a charge per pension.

Consider what type of pension you have contributed to in the past.

If it is a defined benefit scheme, then think hard about consolidating it into your existing scheme.

A defined benefit scheme promises to pay a defined percentage of your final salary at retirement.

These types of pensions are becoming rarer as they are expensive to fund.

In many cases, the transfer value will not be as attractive as the promised future pension income

The transfer value is the cash sum the trustees of the defined benefit scheme have converted the benefits you have built up into, according to experts.

If your old schemes are defined contribution ones, we recommend looking at consolidating these old pensions into your current scheme in some cases.

Consolidate your pensions for better outcomes

Lower charges and more Fund Choices

If you have a number of older pensions then it probably makes sense to consider consolidating them into one simple plan.

Defined contribution schemes

A defined contribution scheme is one where the benefits you get on retirement depend on what has been invested into the plan, and for the length of time it has been invested.

An older defined contribution scheme is likely to be less cost-effective.

Warning: It may not always make sense to combine all your old pensions into one place.

Having two or three different pensions from different employments can give some flexibility when it comes to retirement, this allows you to draw down the funds at different times.

This can allow access to a lump sum from one pension, for example, while maintaining another pension for later retirement.

The alternative is to move them to what is called a “Personal Retirement bond”. This means that you take control of the funds and assume responsibility for the underlying funds, charges, and performance of these funds. You may access some of the funds from age 50.

There may not be any charge or commission to transfer to a large company scheme, and the management fees can be significantly lower.

Consolidating Personal Pensions

When considering personal pensions, the rules are slightly different.

A Personal Pension may be transferred into another Personal Pension or a PRSA. Unfortunately, at this time Personal pensions cannot be transferred directly into a Company Pension scheme. However, They can be transferred into a PRSA, and then into a company pension, Quinn says.