The Department for Work and Pensions have recently identified that people can end up with as many as 11 different pension pots as they go from job to job accumulating a new pot with each change in employment. The movement in the job market due to COVID has only served to exasperate this issue, leaving savers unaware of their total savings and therefore in the dark as to whether they are on track for retirement.
Not only this, pension funds each have associated costs, and multiple funds will incur multiple charges which can only eat into your gains over time.
For people who have been in employment for some time, it is worth noting that older pensions are likely to have higher charges than some of the new ones available and moving to a platform can drastically reduce management costs, sometimes by as much as 1%, services such as PensionBee can help consolidate your pensions into one scheme
However, before you rush to consolidate all your pension pots, there are some pitfalls to be aware of. Firstly, there can be charges associated with transferring pensions, especially older ones and it would be wise to familiarise yourself with these before taking any action, especially on smaller pots where any exit fees can seriously impact their value. It is also important that you are aware of any benefits that your older pensions may have, such as a guaranteed annuity rate option.
If you are fortunate enough to have a workplace pension, where your employer contributes to your pot, then it would be worth considering moving any old pension pots into this. Alternatively, you may want to consider a SIPP where you can enjoy all the freedoms and flexibilities of investing your own pension pot.
Tracking down old pensions isn’t always easy but there is a free Pension Tracing Service which you can use to find out which provider your past employers used.
Peter Field is a financial analyst and has written for InvestingReviews.co.uk covering topics from pensions, savings, investments and ISAs. His knowledge of the Investment market has proven invaluable, making his unbiased views and opinions open and honest for everyone. In 2021 Peter retired and is working towards enjoying more of the outdoors with his beloved labrador Millie.