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Author: Fiona Matthews

Multiple Pension Pots? What Should You Do?

The government recently asked us to imagine a future where we can view all our pension pots at the touch of a button when it shared its vision for a ‘pensions dashboard’.

One of our main drivers here at LifeSight is ensuring that employers have access to all the tools and information required to help their employees make the best retirement saving decisions, and we welcome any move that will help further this. And, Willis Towers Watson are taking part in building the first prototype of the dashboard here in the UK.

As the concept of a career for life is long gone, and the average person today changes jobs around 11 times throughout their working life, the development of a pensions dashboard is significant for the industry – affecting employers and employees alike. Once in full effect, it will allow them to locate ‘lost’ pension pots, understand what they have from all sources and more effectively plan for their retirement.

However, individuals won’t be able to fully benefit from this game-changing new tool just yet. The prototype will be launching around May 2017 and the government’s target for its delivery is 2019. So, in the interim, this means that many people don’t have a clear oversight of the different pension pots they’ve built up over time, how much each amounts to or how to use them once they reach retirement. What’s more, under the current system, knowingly or otherwise, many people are paying a range of fees on savings built up with pension schemes from previous jobs. 

As a result, individuals may not be making the best of their hard-earned savings. A significant issue considering that people are already struggling to save for their futures and are expecting to have to work longer.

Below we share some tips to improve employee’s understanding of where all of the money they’ve saved is and what it is doing for them:

1. Locate pension pots from previous employers, no matter how small

A good starting point to locating pension pots from previous employers is old paperwork, which could include information about schemes you might have forgotten about. You can then contact the respective provider or administrator to get a ‘pension update’. Should the necessary paperwork lack detail, consider getting in touch with your previous employer for the information.

2. If you’re struggling to locate the paperwork, use the government’s pensions tracing service

The government makes available an online pensions tracing service. This will ask you for your national insurance number and information about previous employers, including your job title and the company name. Whilst you don’t need to share all of the information, the more you supply, the better the chance of tracking down all of your pension savings.

3. Keep a record of all relevant pension details

Write down the details of all the schemes you’ve been part of in the past, including the one you are currently a member of and any that you will be part of going forward. Not only will this make it easier for you to keep on top of all of your savings, it will also facilitate the process should anyone else ever have to manage your financial affairs.

4. Consider consolidating small pots under one provider

There are a number of benefits to combining your pensions, including better oversight, reducing fees, easier management and boosting investment performance. Yet, there is a potential downside that you could get stung by exit penalties when you leave. Whether you combine your different pension pots and into which pot you combine them, depends on the kind of pension you have, the fees you are paying, the investment choices available, any restrictions there may be and how long you have left until retirement. Seeking advice from a pensions expert will help you make the right decision.

Until 2019, when the pensions dashboard is set to take effect, employers can help their employees with multiple pensions by explaining that having a comprehensive understanding of all of the money they have saved into different schemes to date will ultimately feed and affect their overall retirement strategy.  Looking at just one pot in isolation means you could be missing some important pieces of the jigsaw that will give you a better picture of your financial future.