Pension Consolidation

Here are two dictionary definitions of the word consolidate:

• to become, or cause something to become, stronger, and more certain.
• to combine (a number of things) into a single more effective or coherent whole.

These definitions can certainly be applied to pensions as many people have a collection of pension plans they have accumulated over the years. There can be various reasons for this, usually it is as a result of moving jobs a few times. Also there are people who have pension plans set up when they contracted out of the State Earnings Related Pension Scheme (SERPS) many years ago.

When we see clients who have a number of pension plans, very often we advise them to consolidate them into one pension. The reasons why this can be advantageous include:

Lower charges – older plans can have higher charges than new plans. Also new plans often discount the charges based on the size of the pot, therefore consolidating a few plans into one can achieve this discount.

Flexibility – as you are probably aware, pensions have undergone a transformation in the last couple of years following the new freedom and flexibility rules. However, many older pension plans are unable to facilitate the new flexibility rules, often due to system issues or the plan wording. Therefore, by consolidating these into one new plan you can benefit from the flexibility that the new rules allow.

Tidying up paperwork – if you have several pensions with different providers you will get several statements, letters, forms and other paperwork which can be tiresome especially if the value of the plans is quite small. By consolidating into one plan you will receive just one set of paperwork from one provider.

It is not always right to transfer your pension or consolidate your plans.

It could be that an existing pension plan has valuable guarantees that would be lost if the plan is transferred.

Or the existing plan may impose a penalty on transfer which could negate any advantage that a new lower charge plan offers.

Therefore, it is very important that you take professional independent financial advice to check that consolidation is the right thing to do.

Here at Robert Nicholas, we have a detailed process to take all the factors into account before we make a recommendation. Therefore, you can be sure that if we recommend you to consolidate your pensions into one, it is the right thing to do.

If you would like to discuss this further, please contact us, remember the initial consultation is free and without any obligation.

Steve Graves
Robert Nicholas Financial Advisers