The average person in the UK works for six different companies during their lifetime. This means they’ll probably have six different pension pots, according to recent research by Quilter.
People could be missing out by not having their retirement funds in a single pension pot. Quilter’s research estimates that by consolidating multiple pensions into just one pot could mean workers save an additional £140,000.
The research* also calculated that for a yearly income of £33,000 from 65 to 95 years old, people would need approximately £500,000 in their pension.
With the assumption that a person has 6 different pensions all with different providers, with £83,300 (approx.) in each pot and each provider charging different annual fees, Quilter estimated charges of 1% up to 2.5%. If all 6 pensions were consolidated in to the one pot with the cheapest rate, they could expect to have just under £1.1m (after 20 years) compared to £936,747 if the pensions were left in the separate pots.
“It’s important that clients have a pension ‘health check’ to make sure their pensions are working as hard as possible for them. Thanks to the success of workplace pension schemes more people are saving towards their retirement, but because their pension pots don’t follow them, they can lay dormant for years with annual charges eating away at their value” comments Active Chartered Financial Planners’ Joe Carey, Independent Financial Adviser
“With a large range of annual charges seen across the pension industry, pension savers need to understand what charges they are paying and whether they can consolidate their multiple pots into the most efficient one with the best returns. Over the long term this can make a material difference to their retirement pot”
The upcoming pension’s dashboard may help users find and consolidate their pension pots. However, figuring out what represents the best pension pot for you isn’t solely down to fees, and consolidation may not be the best course of action for you.
By seeking professional financial advice you are giving yourself peace of mind for financially security in retirement, which may not be as far off as you think.
*Quilter’s research assumes an annual investment growth of 5.5%
The information provided must not be considered as financial advice.
We always recommend that you seek financial advice before making any financial decisions
The value of investments and income from them can fluctuate (this may partially be the result of exchange rate fluctuations) and investors may get back less than the amount invested.
Past performance is not a guide to future performance
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