Five steps to make your pension easier to manage

Sorting out your finances can be a real faff, particularly when it comes to your pensions. But combining your retirement pots can come with significant benefits like making your life easier, reducing your charges and opening up a wider selection of investment and income options.

Research suggests around £27 billion of pensions money is currently ‘lost’, with reasons including changing employer and moving house*. The average lost pension pot is worth over £9,000 – significantly more than you’d find rooting down the back of your sofa!

*Source: Pension Policy Institute

But how do you go about combining your pensions? With a bit of help you can make your pensions a whole lot simpler in five steps.

Step 1: Locate your existing pensions

If you’ve lost track of retirement pots from previous jobs, don’t panic – you are not alone! It is increasingly common for people to have multiple employers across their career and, following the introduction of ‘automatic enrolment’ reforms, all employers are now required to offer staff who qualify a workplace pension scheme. This means every time you change employer, you risk leaving a pension pot behind.

Lots of pension providers will have a service to help to hunt down those lost pots, including AJ Bell’s Pension Finder service, which takes the pain out of locating your old pensions. All you have to do is take a few minutes to fill in details about your old employer and your previous pension administrator, and they’ll do the legwork for you.

Step 2: Check for any guarantees or nasty exit charges

Once you’ve found your old pensions, you might be itching to get them all in one place so you can plan for the future. However, it’s important to check the small print of your old pensions, as you might have valuable guarantees that could be lost if you transfer. Some older-style pensions also come with ‘exit penalties’ that will reduce the value of your fund.

To make life easier for you, AJ Bell’s Pension Finder service will also check your old policies for guarantees and exit penalties, and let you know about them when we locate your pensions. It will then be up to you to decide whether to go ahead and combine your pensions.

Step 3: Ready to combine? Value is key when picking your new provider

Once you’ve done these checks and you’re ready to combine your pensions, the next step is picking a trusted, value-for-money provider to look after your pension money. Cost is a key part of this decision, as overpaying even by a seemingly small amount can cost you tens of thousands of pounds in retirement income. You should also consider things like service, support, investment choice and retirement income options.

Step 4: Choose your investments (or pick an easy off-the-shelf option)

Before combining your pensions, you should consider how you want to invest your money with your new provider, aligned with your appetite for risk and long-term goals. You could pick from the provider’s selection of thousands of investments, including funds, investment trusts, bonds and individual stocks. If that all sounds a bit intimidating, lots of providers have ‘ready-made’ investments or “one-stop shop” funds aimed at different risk preferences.

Step 5: Time to combine!

And that’s it! With very little effort you can now rest easy knowing your pension is all in one place.