growing pension fund

Should I consolidate my pensions?

Over your career, you may work for a number of different firms all with contrasting pension schemes with different pension providers. That means that you’re likely to build up a number of separate pension pots, making it harder to keep track of exactly how much you have saved where and how much you have overall. Pension consolidation is the process of combining all or most of your pension funds into one singular place.

Obviously, this makes things more straightforward and more simple for you, but there are other reasons to consider consolidating your pension.

Working out the best thing to do will depend on a number of factors, including the type of each pension, what they’re currently worth, your plans for retirement, and any potential exit fees to be aware of.

growing pension fund

We spoke with our Financial Adviser, Josh Wilding, for his expert advice on pension consolidation

Arguably, the main advantage of consolidating pensions is to make them a lot easier to manage. If all of your pensions are in one place, you’ll be able to see if you are on track to meet your financial goals - whatever they may be. 

It will help you to project your retirement income and identify any potential shortfalls that need to be addressed. It can also make it much less onerous when it comes to dealing with any paperwork too, as you’ve only got one pension pot to contend with rather than several all over the place.

Consolidating your pensions can save money too

Not only does consolidating your pensions save on time, it can also save on costs as well. If you have multiple pensions with various different providers, you’ll likely be paying administrative fees for the management of each individual pension pot. You always need to be aware of the overall cost of managing your pensions, as these fees will eat into your investment returns. By consolidating your pensions, often you’ll be much more cost-efficient and aware of what the costs actually are.

If you have multiple pensions all in different places, it can be tricky to monitor the performance of all of your investments across these platforms. Some pension providers may place you in funds that are not necessarily right for your current circumstances too. Consolidating your pensions onto a single platform can open up a significantly wider range of opportunities to make your money work harder.

The consolidation of pensions can also provide greater flexibility with how you can access your pension, once you reach retirement. Some pension schemes - in particular, older ones pre-2015 - may not allow you to access your pension in the way that you want to.

By consolidating your pensions into a more modern, flexible plan, you will gain greater control over how you take your benefits in retirement, and additionally, how your pension can be passed on to your beneficiaries.

Are there any downsides to consolidating my pension?

The only potential downside to consolidating your pension funds is that any valuable guarantees and/or benefits that come with your fund could be lost if you transfer out from your current pension scheme. Also, some providers tend to charge exit fees to transfer your funds into another pot, so it’s always worth speaking with a professional financial adviser to see if consolidating your pensions is the right thing for your specific circumstances.

We can also help to advise which pension fund is the highest performing and is most suited to your needs, and then assist with any consolidation to make the process as stress-free and simple as possible for you, our client.

Get in touch today for a free consultation with one of our team.


Pulling finances

Is the cost of living putting you off pension saving?

With Britain in the midst of a cost of living crisis, research from the FSCS has found that 23% of people with a pension have either decreased their contributions or stopped them altogether. Joshua Wilding explores why this is happening, and offers his advice.

Is the cost of living putting you off pension saving? Matthew Douglas

Whether it’s energy bills rising, the cost of the weekly food shop increasing, or mortgage payments skyrocketing, the cost of living is impacting everyone. 

For people struggling to pay their bills each month, decreasing or stopping pension payments is seemingly an attractive option to provide temporary financial relief, with 23% of people having done just that.

Why people are cutting back pension contributions

With pockets stretched, it’s easy to see why people are put off from pension saving and saving in general. 

With some people at their limit and struggling to make ends meet, they need to prioritise paying the bills over saving for the future. When you’re thinking about getting through the next week, you’re not going to be overly concerned about the next 25 years. 

For people in this situation difficult decisions are having to be made, with pension contributions or insurance premiums an easy target to save a bit of money to put towards household bills. 

If you are in this situation and struggling with paying your bills, the best thing to do is contact the service provider of the bill and have a conversation with them. Under rules from Ofgem, they are obliged to help you out with things like payment breaks, affordable payment plans or more time to make payments. 

There are also a number of organisations that provide debt advice and support. These include Citizens Advice, the National Debt Line and National Energy Action. There’s some amazing support out there that’s not shouted about, so you should never struggle in silence. 

Cut luxuries before pensions

Whilst there are people struggling to make ends meet, the average UK consumer is doing ok. For these people it should be discretionary spending - non-essential, luxury purchases - that should get cut back before you think about cutting your pension contributions. 

It’s really important to continue contributing to your pension, even if your monthly finances have taken a bit of a hit, as that’s what’s going to ensure you a comfortable retirement. 

Anyone over the age of 22 qualifies for auto-enrolment to a pension scheme, so make sure your employer is paying in on your behalf. If you can, max out your contributions, especially if you’re living at home with your parents, as your life is likely the cheapest it will ever be.

Check how much risk you’re taking, as investing can help your pension work harder for you, but of course your pension pot can shrink as well as grow. If you need advice, get in touch with a financial adviser to understand what pensions you’ve got or if you want to set up a private pension. That’s what we’re here for.

Pension saving vs savings account

Pension saving is a very tax-friendly way to save for retirement. That’s because you automatically get 20% tax back from the government paid into your pension, and for higher rate taxpayers it’s even more. 

So maxing out your pension contribution is generally a good idea. It is however prudent to have an emergency fund of six months’ salary saved in an accessible account in case things go wrong. 

Once you have that, upping your pension contributions helps you short term by ensuring you effectively pay less tax, and long term it helps you fund a nice comfortable retirement, which is ultimately what most people want. 

At Matthew Douglas, our team of retirement planning experts are here to help you ensure your pension is right for you. Get in touch with us to discuss your options.


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Your guide to getting retirement ready

Key steps to achieving a comfortable retirement

A comfortable retirement is a common financial goal, and contributing to a pension is essential to achieving it. Although retirement may appear distant at the moment, there’s much to consider. Let us assist you in navigating this crucial life milestone.

By planning ahead and making smart decisions about your savings, you can ensure a stable and enjoyable retirement.

Here are 10 steps to help you get pension retirement ready:

1. Assess your current financial situation
Start by evaluating your current financial standing, including your income, expenses, assets, and liabilities. Determine how much you can save for retirement without compromising your current lifestyle.

2. Set retirement goals
Think about the kind of lifestyle you want to have during retirement. Consider factors like travel, hobbies, healthcare, and support for family members. Estimate the annual income you will need to maintain this lifestyle, taking inflation into account.

3. Calculate your pension gap
Compare your projected retirement income with your current savings and expected pension benefits. This will help you identify any potential shortfall in your retirement fund, known as the pension gap. Knowing this gap will give you a clear target to work towards.

4. Contribute to your pension plan
Commit to regularly contributing to your pension plan. The earlier you start, the more time your investments have to grow, thanks to the power of compounding. Look into your employer’s pension scheme and take advantage of their matching contributions.

5. Diversify your investments
Don’t rely solely on your pension plan for your retirement income. Diversify your investment portfolio with other assets like equities, bonds and property. This will help spread risk and provide the potential to increase your returns.

6. Review your pension plans regularly
Revisit your pension plan at least once a year to ensure it’s on track to meet your retirement goals. Adjust your contributions or investment strategy if necessary, and contact us about seeking professional financial advice if you need clarification on your decisions.

7. Plan for the unexpected
Life can be unpredictable, so it’s essential to have contingency plans in place. Ensure you have an emergency fund to cover unexpected expenses and consider insurance policies like life and health insurance to protect yourself and your family.

8. Reduce debt before retirement
Aim to pay off high-interest debts, such as credit card balances and personal loans, before you retire. Entering retirement with minimal debt will reduce your financial stress and help you enjoy a more comfortable lifestyle.

9. Consider working part-time during retirement
If you’re concerned about your retirement income, consider working part-time or freelancing during your retirement years. This can provide additional income and help you stay active and engaged.

10. Stay informed about pension regulations and changes
Keep updated with any changes to pension regulations, tax laws, and investment options that could impact your retirement planning. Staying informed will help you make better decisions and adapt your strategy accordingly.

By following these steps, you can take control of your financial future and work towards a comfortable and fulfilling retirement. Starting early and staying consistent with your contributions and investments is vital to a successful pension plan.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.


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How to secure an income stream for life

Deciding what to do with your pension fund can be a complex decision

Are you approaching retirement age and have a pension fund that you need to decide what to do with? There are several options available to you, but one option is to buy a lifetime annuity. An annuity is a financial product that converts your pension fund into an annual pension.

If you’ve contributed to a defined contribution pension scheme during your working life, you may have a sizeable pension fund built up by the time you retire. Buying a lifetime annuity is one way you can use that pension fund to secure an income stream for the rest of your life.

Complex decision
It’s important to remember that the first 25% of your pension pot can be taken tax-free, subject to no protection in place and not exceeding £1,073,100, but you’ll be charged Income Tax on any additional money you take. Furthermore, you may need to consider the impact on your eligibility for state benefits or care services.

Overall, deciding what to do with your pension fund can be a complex decision. It’s important to consider all options available to you and seek professional financial advice to make the most suitable decision for your individual circumstances.

Approaching retirement
Nearly one million (990,000) pre-retirees, those aged over 55 and still in work, are considering annuities for the first time in preparation for their retirement, according to new research[1].

One in six people approaching retirement but still working (16%) are looking at annuities due to improved rates against the backdrop of rising living costs. This is in addition to the 828,000 (14%) of working over-55s who had always planned to buy an annuity in retirement[2].

Pre-retirees
Aside from the improvement in rates (18%), people considering an annuity are drawn by the stability of a guaranteed income making it easier to plan their finances (78%) and the assurances the product offers in a volatile market (36%).

But there is still a lack of awareness around annuities. Of the one in five pre-retirees who wouldn’t consider an annuity (20%), 16% said it was because they believe they offer a bad deal.

Guaranteed income
An additional two out of five pre-retirees (44%) described wanting a guaranteed income for the rest of their lives but only half that number want or are considering an annuity, despite this being exactly what it is designed to achieve.

There’s no hard and fast rule when it comes to deciding how to fund your retirement. What might work well now, may not be suitable for you in 10, 15 or 20 years’ time so it’s really important to remain actively engaged with it throughout later life. If an annuity has been purchased there will be no option for alteration in later life.

Financial pressures
Despite annuities becoming more popular, the research shows there’s still a lack of understanding about what an annuity is and what it can offer. This means people risk having an ‘either/or’ approach to funding their retirement, when in fact a blended approach might be more suitable.
It’s important people are aware of all the options they have and whether a combination of these may present the best outcome. Having this knowledge will ensure people can reclaim their retirement at a time when they might be feeling lost due to financial pressures outside their control.

Source data:
[1] This is based on Legal & General’s own data. The YOY data was calculated in the 12 months ending in October 2022.
Research was carried out online by Opinium Research amongst 2,003 UK adults aged 55+ who are still in work between the 8–17 November 2022. Pre-retirees relates to those aged 55+ who are still in work. According to ONS statistics, there are over 6,000,000 UK adults aged 55+ who still work. 16% of working adults aged 55+ who had not previously considered an annuity are now considering one because of interest rates and cost of living. This equates to 990,000 UK adults.
[2] According to ONS statistics, there are over 6,000,000 UK adults aged 55+ who still work. 14% planned to buy an annuity, which equates to 828,000 UK adults.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS PLAN HAS A PROTECTED PENSION AGE).

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.