Consolidating your pension

[00:00 - What is pension consolidation?]

If you’ve moved job a few times, you’ll probably have built up pensions in a few places. Consolidating your pensions in one place – such as in a Self-invested personal pension (SIPP) – can make it a lot easier to see what pension savings you have. It can also mean a whole lot less paperwork.

[00:25 - Should I consolidate my pensions?]

There could be good reasons to consolidate into a SIPP, such as reduced costs, greater investment choice and more flexibility in how you can take your pension. It can also give you more choice about who you can leave funds to on your death.

[00:45 - Pension consolidation and transfers checklist]

But before transferring pensions to SIPP, there are a few important things you need to think about.

First of all, will your existing pension scheme charge you an exit penalty or make a market-value adjustment to your fund? This could mean you lose money if you transfer it.

Second, if you transfer your pension to SIPP, will you lose any valuable benefits or features? Do you have a guaranteed annuity rate, for example, or the ability to take more than 25% of your fund tax-free? These benefits are usually lost when you transfer, so you need to be careful.

Third, does your employer contribute to your current pension scheme and if so, are they willing to pay into a SIPP, or would you lose these valuable contributions?

[01:25 - Defined benefit pension schemes]

Generally, you're probably better off not transferring to a SIPP if you're a member of a defined benefit or final salary scheme where your income in retirement is guaranteed for the rest of your life, and possibly for the life of your spouse after you die. If you do want to find out if transferring from such a scheme is worthwhile, you'll have to take advice from a suitably qualified financial adviser if your transfer value is more than £30,000. Otherwise, the scheme trustees won't allow you to transfer out. You can't transfer out of most public sector schemes, such as the NHS, teachers or civil service pension schemes.

[02:00 - Pension consolidation options]

If you transfer your pensions into a SIPP, you’ll be responsible for your own investment decisions, so you need to be comfortable doing this. If you know the investments you want to make, you should check whether you can access them via your existing pension, as you may not need to transfer.

If you sell your investments to transfer cash, you will be out of the market, and you could lose out if values go up. To avoid this problem, it’s possible to transfer assets from your old pension into your SIPP without selling them.

Finally, whatever type of scheme you have, you should compare the costs of your existing pension to the costs of the SIPP.

You can find other important things to know and consider before consolidating your pension on the AJ Bell website. You can consolidate your pension with AJ Bell and use our pension finding service to find your lost pensions.