Five ways combining pensions can boost your retirement pot

If you’ve moved between different jobs over time, you’ll probably have built up pensions in a few different places. Getting them in one place not only helps you remove a whole heap of hassle, but it can also boost your retirement pot.

Here are five benefits of combining your pensions.

1. Easier management

One pot means it’s far easier to keep an eye on your total pension savings and estimate what that could give you in retirement. This will help you make informed decisions, like how much to increase your contributions by which could mean more in your pension pot.

With a Ready-made pension, any money paid in (including eligible pensions found via our pension finding service), will be automatically invested for you, into your chosen AJ Bell fund.

2. Reduced paperwork

Having all your retirement savings in one place means fewer statements to wade through, and only one online log in to remember. This not only gives you your own time back, but mean it is simpler to find the information you need, like how much of your pension allowances you’ve used.

3. Lower charges

Different pension companies charge varying fees for managing and investing your pensions. And older style pension schemes can come with high annual charges. If you combine your pensions into a plan that offers better value for the features you need, you’ll end up paying for less in charges – meaning more of your pension money gets invested for longer, giving your pot a boost over time.

Read more about how even a small reduction in ongoing charges can make a big impact on your pot in this article.

4. Investing choices to suit you

Combining your pensions into a SIPP will usually mean a far greater investment choice than other types of pensions, which lets you choose and manage your own pension investments to match your individual goals. This is particularly important as you approach retirement and are thinking about how and when you’ll access your pension money.

Workplace pensions often invest your savings in a standard ‘default investment fund’, which is designed to be a one-size-fits-all solution. Some ‘lifestyle’ funds even change the asset mix of your investments as you approach certain age bands which might not match your own retirement goals.

If you’re still concentrating on building up your retirement pot and would prefer a tailored range in a low-cost account, our Ready-made pension lets you choose from four AJ Bell growth funds, managed by our in-house experts.

5. More options at retirement

Combining your pensions in a SIPP means you’ll have access to all the main retirement options when you want to access your money, rather than being restricted to what each of your existing providers might offer. You don’t have to access your SIPP all at once, meaning your pension can stay invested, or you’ve got the flexibility to match your goals in the run up to accessing your money. If you stay invested at and through your retirement, a SIPP can also help you plan your income withdrawals to be as tax efficient as possible.

A SIPP can often give you more choice about who you can leave your fund to upon your death.

What else should I think about?

AJ Bell’s free pension finding service checks for guarantees and benefits as part of the transfer process, but here are the main things to watch out for if you are looking to combine your pensions yourself.

It’s not usually in your best interests to transfer a SIPP if you're a member of a defined benefit or final salary scheme.

Other older schemes might come with other benefits, like a guaranteed annuity rate 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.

Finally, exit fees have largely been left in the dark ages, but you should still check whether your existing pension scheme charge you a penalty or make a market-value adjustment to your fund if you transfer away.