The concept of a working career fits the 22 to 65 age range, give or take a few years.
According to the insurance company LV, UK workers change jobs on average every five years. In the USA the average is four years.
So, a typical working life could involve as many as eight pensions, not to mention the state pension.
Unfortunately, a lot of different pensions can involve a lot of different rules. They will have different charges, different investment choices, different passwords, different contact details, different values. They may even be completely different types of pension.
Ignoring them is likely to cause you problems in later life.
Let the games commence
The time will come when you may need to start taking an income from these pensions. This is when the fun begins. How do you want to take your income – tax-free cash, annuity or income draw-down?
- Does your pension scheme offer all these choices?
- Do you want your retirement money monthly, quarterly, annually or on an ad hoc basis?
- You may have clear ideas about how you want your money, but will your provider agree to them?
- To make sure you’re paid when you want, who will actually administer the pension cash? You or your provider?
- What part does your final-salary/defined-benefit pension play?
- Should you consider transferring your final-salary pension?
- How much will it cost?
- How do ensure you don’t run out of money?
- What happens when I die?
- What about income tax and inheritance tax?
- If you die before your partner, how do you know he/she will be secure?
Don’t forget, during your career the pension provider may have an overhaul and change the rules on how you deal with them. They may merge with another company or even go bust. If you stick with separate portfolios for eight, nine or ten pensions, your “retirement” may be less relaxing than you hoped. Just managing your pensions could become your new default career.
If you don’t have the time or inclination to do this, the situation may become unpleasant.
Don’t procrastinate, consolidate
Consolidation is the magic word that could make these problems disappear. As much as possible (you may wish to keep that gold-plated final-salary pension) you should look to put your pensions together.
Have one investment strategy and deal with one pension provider. You will then only have to track one income source and the question of whether or not you’re going to run out of money becomes an easier question to answer.
This can have two benefits – saving money and reducing risk.
Who’s going to collect all these pensions and which provider do you go with?
Get expert help
Everything described here is one part of what a Financial Planner does for you. They can cut through the confusion and din of multiple pensions and drastically simplify things. They can put your various schemes through the factory of analysis and package them up into a neat box of income for life.
Your priority in retirement should be enjoying your life and getting the most out of your time. Delegate this laborious task to an expert and let them know how much money you want in your bank account each month.
Consolidating your pensions may be a lot more difficult, however, if you choose not to use a regulated financial adviser.
Contact Capital now and get this item ticked off your to-do list.