Savers could miss out on £140,000 by not consolidating

Pension savers could save more than £140,000 by consolidating multiple pensions into a single pot, according to analysis from Quilter.

The analysis assumed that the individual in question would be saving for a “comfortable retirement”, which it estimated at £500,000 as this would provide income of £33,000 per year between the ages of 65 and 95.

Quilter highlighted the importance of consolidation by pointing to research from the Association of Accounting Technicians which found that the average person works for six different companies during their lifetime, which would mean that they could also have six different pension pots due to auto-enrolment.

As such, Quilter assumed an individual would have six pension pots with six different providers with around £83,300 in each, with each provider charging different annual fees of 1.0 per cent, 1.3 per cent, 1.6 per cent, 1.9 per cent, 2.2 per cent and 2.5 per cent.

In this scenario, a saver could expect to have £1,076,852 after 20 years if they consolidated them all to the cheapest pot compared to £936,747 if they didn’t consolidate, assuming modest investment growth of 5 per cent per year.

Quilter pension expert, Ian Browne, said: “In times gone by someone may have got a job at a company straight out of school and worked there for the entirety of their career. This is now a rarity with most having at least six employers and six different pension pots associated with each.

“Particularly now, thanks to the success of workplace pension schemes, more and more people are putting money away for their retirement but because their pension pots don’t follow them these pots can lay dormant for years with annual charges eating away at their value.

“With a huge variety of different annual charges seen across the pension industry it is essential that pension savers understand what charges they are paying and whether they can consolidate their multiple pots into the most efficient and best value one as over the long term this can make a material difference to how much they will have in retirement.

“The upcoming pensions dashboard may help users find and consolidate their pots.
However, figuring out what represents the best pension pot for you isn’t solely down to fees and so it’s vital to get financial advice.

"There are scenarios where consolidation may not be the best course of action which is why professional financial advice is key.”

    Share Story:

Recent Stories



How the bulk annuity market is changing
Laura Blows speaks to Peter Jennings and Prash Mehta from Just about trends in the bulk annuity market and how this could impact trustees hoping to secure insurer engagement in 2022 and beyond
DC master trusts
Pensions Age editor Laura Blows, editor of Pensions Age look at developments within the DC master trust market with Paul Leandro, partner at Barnett Waddingham, and Mark Futcher, partner and head of DC at Barnett Waddingham.

Advertisement Advertisement