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AJ Bell launches ‘ready-made pension’ to help savers find and merge old pots

Combining pensions in one place can cut down on admin and work out cheaper.

But it is not always advisable because you can risk losing valuable benefits when you leave an old scheme. You might find it’s worth rolling up some old pensions together, but leaving others alone.

Here’s what to check before making a decision.

1. Fees on old and new pension schemes

You should check charges as they can make a serious dent in your future returns.

2. Where are your pensions invested

Past returns are not a guide to the future, but you should investigate where your money will be held. Read our guide to carrying out a healthcheck on investments.

3. A private provider versus your work scheme

Pension consolidation firms have sprung up to help people manage all or most of their pensions in one place, and this can be cheaper as well as more convenient.

However, your current workplace scheme is likely to have used its scale to negotiate lower fees too.

Rolling up your older pensions into your existing workplace pension might be the handiest option, especially if you want to cut down on admin.

4. Guaranteed annuity rates

If these are high it can be worth sticking with an old pension and using it to buy an annuity.

You have to get paid financial advice to move a pension worth £30,000 plus with a GAR attached.

5. Guaranteed fund returns

These are rare but it is worth checking the small print to see if you benefit.

6. Bigger lump sums

Some older company pensions allow you to take a tax-free lump sum of more than the typical 25 per cent.

7. Large exit penalties

Most default work pension funds are trackers with cheap charges these days. If you have a costly old pension with restrictive investment choices you could weigh the benefits of moving despite penalty fees.

Exit fees are capped at 1 per cent after you reach the age of 55.

8. Ongoing employer contributions

You will be getting free employer contributions into your current work scheme, and you don’t want to lose that cash coming into your pot.

9. Protected pension ages

It depends on the scheme rules so check them, but you might not want to lose the opportunity to access a pension at 50, especially if you have several others which will kick in later.

10. Final salary pensions

Outside the public sector, generous final salary pensions paying a guaranteed income until you die, plus valuable death benefits to surviving spouses, have virtually been wiped out.

They are the most generous and safest pensions available. You are required to get paid-for financial advice if your transfer value is £30,000-plus, which is a longstanding safeguard against making mistakes you can’t take back later.

> Should you combine your pension pots? Read our full guide

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