Why do we save our money into a pension plan?
People’s answers may vary in detail, but the vast majority of us are motivated by a fear that our earnings will eventually tail off and that we will have to rely on our savings and income from the state or company pensions.
It’s worth understanding from the start that when you are saving into a pension pot, rather than to be granted an income for life, the job of turning the savings into an income is your job. You may not have volunteered for that job, but if you want a pension from your pension pot, it’s going to be down to you.
It’s no easy business turning a pot into a pension but it’s a lot easier if you are starting with one pot, rather than a number of them. Sadly, most of us will save into a large number of pension pots before we get to the point we want our money back, meaning that we face the choice in our fifties or sixties of trying to mix things up from a variety of pots, or biting the bullet and combining all the little pots into one great big pot.
Generally it is a good thing to have one big pot rather than a lot of little ones. Here are some arguments for bringing your pots together
- It is a lot easier to manage an income from a single pot
- Some pension providers (People’s Pension and Pension Bee will give you lower charges the more money you have with them)
- Unlike bank accounts , there is no additional protection from FSCS for splitting your savings
- Pensions are complicated enough without having to have lots of pension pots.
So in principal, most of us would like to bring our pensions together, but there are two nagging doubts that stop us
- Might we be missing out or being penalised for transferring one pot into another
- Which pot is the one I should be transferring out of and which should I use for the future.
As regards penalties and lost opportunities, we are told we should be taking advice, but where do we get that advice from, how much does it cost and is the cost of insuring I’m not being stupid worth it?
As regards which pot to use going forward, what’s my priority? Am I looking for my money to stay invested, do I want my money back now or do I want my money back in stages – or even over the rest of my life? There are lots of nuances too, how important is tax-effeciency to me, how important are guarantees and what do I want to leave to my family.
You soon realise that the choice of what you do with your collected savings depends on a lot more than how your savings have done in the past, though you probably want a view of how you’ve done in the past as a starting point.
How AgeWage helps
This is tricky stuff and we don’t want to frighten you into putting “pension consolidation” into the “too-hard” box. Nor do we want you rushing willy-nilly into consolidating into the first pension that takes your fancy.
Doing nothing could be better than impulse buying!
We can help you in three ways and coincidentally they spell out the AGE in AgeWage.
Assist – we can help you with your paperwork; you may have problems remembering where all your pension are. We can help you find them and once you have we can give you a simple way of getting the information on them you need to understand how they’ve done and how each pension pot provider can help you going forward.
There is probably a compelling case for choosing any of your pension pot providers to manage your retirement needs, but you’ve got to decide on the compelling case for you. We will help you to work out for yourself your later life priorities and then help you match these priorities with what’s on offer. We can’t tell you what to do, but we can show you where what you want and what’s on offer are closely matched.
Of course you may want to look a little further afield and consider a pension pot provider that hasn’t managed your money in the past. AgeWage has its favourites as you’d expect, providers of guaranteed pensions (Annuities), providers of drawdown policies and wealth managers who’s principal aim is to preserve your capital and pass it on to your heirs.
We’ll equip you to take the decision of whether to stick with one of the providers you already use, or a new provider, matched to your needs going forward. We will help you personally , using clever chatbots – or if you prefer, someone on the end of a telephone line, so you feel comfortable to take decisions for yourself.
Is AGE advice?
No – we’re not telling you what to do, we’re helping you , we’re guiding and equipping you, but in the end – the decision about whether and how to bring your money together in one place is your decision.