Pension ConsolidationWritten on September 6, 2023 by Kirk Rice LLP
The Question:
I have built up four pensions personally and with employers and want to ensure they are kept in my bloodline should anything happen to me. Should I transfer them all into one plan to manage them better?
Kirk Rice LLP answers:
Pensions are a core financial planning investment and a tax-efficient vehicle, making them an attractive way to save for the future. Pension rules regularly change, and most people could benefit from regular advice.
There are several aspects to consider when thinking about pension consolidation into one plan. It makes it easier to manage being under one umbrella but it’s important to distinguish what type of plans are held and ensure they do not have any legacy perks attached to them. Such as Guaranteed Annuity Rates (GAR) which can be lost upon transfer.
Employer schemes typically have a lower charging structure as the money is invested into default funds, designed to protect the fund value the closer you get to retirement. They may also benefit from employer contributions, which we wouldn’t want you to lose.
The first part of the advice process is to review each plan on your behalf to understand how they benefit you and highlight issues that may benefit/impact your future plans, such as charges, guarantees, transfer fees, suitability of funds and past performance.
The suitability of funds and past performance is measured against your investment preferences. If you are a cautious investor with limited investment experience, we would expect the fund selection within your plans to reflect that.
It’s also important to note that since April 2015, pension death benefits have changed, enabling Pensions to be paid to a nomination/s of your choice upon your death in a tax-efficient manner. They also sit outside of your estate for inheritance tax purposes.
After conducting a full analysis of your pensions, your adviser may make recommendations to improve your financial security and reach future goals.
We use cash flow planning to help visualise your future, and it is a great starting ground; it’s a powerful software that takes your expenditure, income and surplus cash and enables us to model various scenarios to see how this will impact your wealth and potential future tax implications. For example, it can model if you want to enhance your pension contributions or ensure you have enough funds to retire at a particular age. Many scenarios can be modelled depending on what is important to you and what you want to achieve for the future. The cash flow also takes into account inflation, stress tests and growth expectations. This service has given our clients a sense of comfort for their future.
If you would like to discuss pension consolidation or require any other financial planning assistance, please email info@kirkrice.co.uk to arrange a call with one of our Financial Planners. Kirk Rice offers a free no, obligation first meeting and fees and costs of work involved would be discussed. We do not carry out any work without your consent and agreement to fees.
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Please note: our articles are for general guidance on the date of publication only and, specific advice should be taken before acting on any of the suggestions made.
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