Putting All Your Eggs in One Basket
Most of us typically bank with a single provider. We might have different accounts, for example an ISA, a current account, and a credit card but often everything sits in one place.
But when it comes to pensions, it’s likely you’ll have multiple pension pots. That’s because each time you start a new job, your employer must put you into a pension scheme. So, you end up with a new pension pot, often with a different provider.
This makes keeping track of your pension difficult and it’s hard to get the full picture of your savings if they are spread here, there, and everywhere.
This is where pension consolidation comes in. With pension consolidation you combine all, or some, of your pension pots together.
Should I combine my pensions together?
On the surface combining your pensions seems like a sensible option. With all your pensions under one roof, you can:
- Easily see how much you have saved
- Reduce administration – you only have one provider you need to keep in touch with, only one account to monitor and one set of login details to remember
- Potentially save money by minimising administration fees
- Achieve better growth
But, just like how banks have different interest rates and rewards, not all pension savings are created equal and not all pension schemes offer the same benefits.
What do I need to consider?
When moving your pension pots from one provider to another, you need to think beyond the value of your savings.
Providers such as us, offer a range of benefits that often aren’t available in other pension schemes. For example:
- A Defined Benefit (DB) pension – in the NESPF you get a guaranteed income for life which comes with inflation protection. This means that as the cost of living increases, so too does your pension. Additionally, your pension isn’t impacted by investment performance so any changes in the financial market or economy don’t impact its value. With a DB pension you have the benefit of knowing exactly how much money you will get, and that your pension will never run out in retirement.
- No fees or administration charges within the Fund.
- Life cover – with the NESPF a tax free lump sum is paid out if you die before you retire. Life cover might not be included in other schemes or could come at an additional cost.
- Spouse’s, partner’s, and children’s pensions are available too should you pass away.
Outside of the NESPF, other schemes will have additional factors like drawdown flexibilities and exit charges that you will need to consider.
Can I transfer all my pensions to the NESPF?
There are strict regulations in place around transfers of pensions in the Local Government Pension Scheme (LGPS – that’s the pension scheme we administer.) We only accept transfers from:
- Other public sector pension schemes e.g. NHS, Police, Civil Service and Teachers, and
- Within the first 12 months of joining the Fund
If you have pension savings with a provider such as NEST, or Standard Life or another private sector company, or it’s been more than 12 months since you joined us, we won’t be able to accept a transfer.
Where to get help?
If you are unsure about whether combining your pension is the right move, there are a number of places you can get help.
An Independent Financial Advisor (IFA) will be able to give you tailored advice specific to you. They’ll review your entire financial situation, including the different pension savings you have and the benefits with each one. They’ll be able to help identify the pros and cons of transferring. You can find a registered IFA at Unbiased or through the FCA.
Alternatively, online resources such as the Government’s MoneyHelper service can provide further information on consolidating.
