Pensions - consolidate or leave separate

[David_M]

I have two separate pension funds (split roughly one third / two thirds by value at the moment) and now my employer is changing fund provider so I could start to build up a third.

My cautious self thinks that keeping them separate would be safest (don't put all your eggs in one basket etc), but I wonder if there is any benefit in consolidating them?

[VR99]

David_M said:

My cautious self thinks that keeping them separate would be safest (don't put all your eggs in one basket etc), but I wonder if there is any benefit in consolidating them?

I had 3 pensions including current employer one..as 2 were with the same provider I merged them..there is a long backstory to this but from an admin perspective it just worked better.
The other pension is with a different provider and for the same reason as you mentioned above keeping it separate...that's my 'hedge' if one does really bad..not exactly a master financial strategy but works for an amateur like myself.

[chrisch77]

Bear in mind having separate pensions allows you more flexibility when you want to drawdown at retirement - i.e. you can choose to cash in one policy (subject to whatever the rules are) and then buy an annuity with another. As I understand it, if you consolidate your policies you have to do one or other action with the whole pot.

[mikeiow]

chrisch77 said:

Bear in mind having separate pensions allows you more flexibility when you want to drawdown at retirement - i.e. you can choose to cash in one policy (subject to whatever the rules are) and then buy an annuity with another. As I understand it, if you consolidate your policies you have to do one or other action with the whole pot.

I don't think that is true? You have plenty of flexibility on using none, some or all of a DC for an annuity - see https://www.moneyadviceservice.org.uk/en/articles/... for confirmation

Consolidation might make it easier to manage. In my experience, the older schemes I had were not performing great, and because there was 'only' small amounts there, I didn't give them any focus....after moving them, they are now part of a scheme that gets 100% focus!

[rustyuk]

I had 4 pensions of relatively low value (around 10k each) stuck in mediocre work schemes. I consolidated them all into a SIPP and then spread the funds over 3 trackers.

Over the last 5 years the gains are substantial (well over 50%)

[Mr Pointy]

David_M said:

I have two separate pension funds (split roughly one third / two thirds by value at the moment) and now my employer is changing fund provider so I could start to build up a third.

My cautious self thinks that keeping them separate would be safest (don't put all your eggs in one basket etc), but I wonder if there is any benefit in consolidating them?

The key issues are how well are they performing, what are the charges & are there any valuable benefits you might lose by moving.

If they are performing well & the charges are reasoanble then there's no real reason to consolidate. If they are not performing well & the charges are high then you could almost definately benefit by moving them. You don't have to have diversity of provider for security but you might spread your investment across different funds within that provider (a bit in a very safe one, most in a averagely adventurous one & a bit in a real rollercoaster) so that you aren't too focused on one fund.

[benbuhagiar]

chrisch77 said:

Bear in mind having separate pensions allows you more flexibility when you want to drawdown at retirement - i.e. you can choose to cash in one policy (subject to whatever the rules are) and then buy an annuity with another. As I understand it, if you consolidate your policies you have to do one or other action with the whole pot.

As an IFA, this isn't true.

[JulianPH]

mikeiow said:

chrisch77 said:

Bear in mind having separate pensions allows you more flexibility when you want to drawdown at retirement - i.e. you can choose to cash in one policy (subject to whatever the rules are) and then buy an annuity with another. As I understand it, if you consolidate your policies you have to do one or other action with the whole pot.

I don't think that is true? You have plenty of flexibility on using none, some or all of a DC for an annuity - see https://www.moneyadviceservice.org.uk/en/articles/... for confirmation

Consolidation might make it easier to manage. In my experience, the older schemes I had were not performing great, and because there was 'only' small amounts there, I didn't give them any focus....after moving them, they are now part of a scheme that gets 100% focus!

You are correct Mike, this is not true.

No one has greater flexibility with multiple pots as they do with one combined pot.

The only exception to this is the small pot withdrawal rules.

Diversity comes from the underling assets, not the pension provider.

As an extreme, you can have several pensions all invested in the same things - so all your eggs are in one. basket, just with different pension providers.

The alternative is that your investments are very diversified, but administered by just one pension provider. In this case your eggs are in many different baskets, but they are administered centrally, by one provider which can give you all the information on everything in one place.

If the pension provider fails then this will cause you a short term headache, but providing the pension is written under trust (which nearly all SIPPs are - though not all insurance company schemes) then your money is ring fenced from their money.

Insurance based pensions are like bank accounts though. Your money sits on their balance sheet and is up for grabs if the provider fails (Equitable Life and multiple banks are classic examples of this).

So holding multiple assets under a Trust based pension is very safe (though if the assets fail - rather than the pension provider - a la Woodford & HL, then you will indeed suffer such losses. This is just down to the underlying investment though, not the provider you used to access them.

Sorry, that got longwinded!