Should I combine my pension?

There can be many advantages to combining pensions or consolidating pensions as it is also known.

Creating your own Pot of Gold

You’ve probably been wondering for a while if it’s a good idea to combine your old pensions into a single pot. As always, it depends upon your individual situation.

All those old pensions do need looking into for sure. Are there any with guaranteed values? What is the effect on spouse’s pensions? How are your funds being managed, if at all?

One thing’s for certain, now is absolutely the right time to look into this. And it could just turn into your own pot of gold.

Why you should look at Active Fund Management.

Assuming you are not giving up guarantees on your old pensions, combining previous pensions into a single pension which you can continue to add to, usually makes sense..

It allows for all of the pension funds to be aligned to your attitude to risk and makes it easier to track the performance of just one pension rather than several pensions dotted around many places.

From your past employers you may have a Group Personal Pension (GPP). For certain, your past employers don’t give two hoots about how your old pension is doing and what’s more GPP are mostly invested in default balanced managed funds.

Such funds are low on cost and low on management. They are under-managed for 2 reasons.

Firstly, it’s a bind to find out every employee’s risk profile.

Secondly, average performance is the goal.

However, I’m sure you’re not average. And if you’re serious about maximising the growth opportunities in your pension, then taking control and consolidating your old pensions is indeed a smart move.

Have them put in active funds to suit your risk profile. Managed by an advisor who cares about you.

How regular contributions grow your pot

There are 3 reasons why pensions are so effective for long term saving:

1. An additional 20% added by the Government to personal pension contributions.
2. You can’t get at the fund until at least aged 55, making the third reason possible:
3. The compounding effect of your contributions boosted with good fund management

The compounding effect is the ability of an investment to generate earnings, which are then reinvested with the goal of generating more earnings. In other words, compounding refers to generating earnings on top of previous earnings.

Actively managed pensions using a range of collective investment funds are a good idea to diversify risk and opportunity for growth. Each fund will be  commonly made up of between 20 and 40 company shares listed on the stock exchange. When these companies declare dividends for shareholders the earnings are invested back into this fund.

This means any future growth of the share price will lift the value of the original investment plus the extra amount of dividend earnings, thus compounding the growth positively.

Take action now

Many people do not take their pension contributions seriously until they reach their 40s or 50s. It’s important to understand that while we all want to live the best life we can right now, not saving enough for retirement will mean working longer than you expected or a reduced standard of living later on in life.

However, there’s no need to panic – you may have some past employers’ pensions which could be combined into a personal pension under your control.

The fact you are reading this article means you are taking your future seriously.

The aspect which makes the most difference to how much you can build is regular pension contributions for as much as you can afford. Add to this any old pensions you may have from previous employment and you really can create your own pot of gold.

Finally, this really is an area in which independent financial advice for retirement planning pays off. A good firm will have sophisticated cashflow planning software which can give a detailed idea of the date at which you can reasonably retire and how much you’ll need to have in your pension to live the lifestyle you desire.

Interested in finding out more?

Seeking a second opinion on your financial future costs you nothing.

Simply call our friendly team on 0121 355 4455 or drop us an email to appointments@oaklandswealth.com to arrange a confidential chat.

Oaklands Wealth Management, founded by Helen Blackburn in 2004 advises clients around the Midlands on retirement planning, pensions & investments.

Her firm holds British Standard BS 8577 for client service & investment process.

Minimum investment is £500,000 (£650,000 for pension transfers).