Is it time to consolidate?

Published: 27 April 2018

A new dashboard allowing people to view all their lifetime pension savings in one place will be an important tool for consumers when it is launched.

The pensions dashboard is currently expected to arrive next year, the culmination of several years of planning and debate. The aim is to provide one place where consumers can view everything from workplace pensions to private investment pots and their state pension.

The Work & Pensions Select Committee, which has urged the government to ensure it goes live by April 20191 , said in a recent report that the dashboard would be “a vital tool in informing and engaging customers and empowering them to exercise pension freedoms in their own interest”.

The challenge of multiple pensions

The average worker has held 11 jobs by the time they retire, according to research, with many likely to have paid into pensions through at least some of their employers2. The number of people saving into workplace pensions has also been rising since automatic enrolment took effect in 2012, meaning more people are now likely to retire with a multitude of pension pots.

So perhaps the most obvious advantage of the dashboard will be that it helps people keep tabs on their various savings pots. Estimates suggest that up to four out of five people lose track of pension pots and leave valuable savings unclaimed3.

Being able to view a range of different savings pots in one place also makes it easier to understand and manage your potential future wealth. The alternative is likely to involve looking out numerous documents from different companies using different terminology and formats.

That makes it a potentially laborious task that is likely to deter many people from doing it at all. It may well help explain why half of consumers with a pension have not reviewed how much it is worth in the last 12 months, according to the Financial Conduct Authority4.

An investment platform can help

Having a single view of your long-term retirement savings isn’t something that will only become possible when the pensions dashboard goes live. Thousands of people already benefit from being able to hold and view their investments in one easily accessible place, in the form of an investment platform like Alliance Trust Savings.

Consolidation, or bringing together as much as you practically and sensibly can to manage it more effectively - can be especially useful when you’re beginning to think more actively about planning your retirement.

Around this stage you’re likely to be more interested in whether your money is working as hard for you as possible. Is it in the right place for your needs, risk appetite and objectives? Are your investments performing well? Are you making the best of tax-efficient opportunities such as pensions and ISAs?

Holding a consolidated basket of investment and pension holdings on a single platform not only makes it easier to keep an eye on these issues, but also provides the trading services you’ll need to make changes to keep your retirement plans on track.

Consolidation can also be an opportunity to tackle potential problems with your existing arrangements that may be undermining your wealth, such as holding money in expensive funds that aren’t performing well, or in any old-style ‘legacy’ plans with higher charges than levied on more modern pensions. Avoiding the corrosive effect of unnecessarily high charges on long-term returns can make a big difference later in life.

You may have to pay exit charges to leave existing plans, and there’s also the risk of leaving valuable benefits behind. So always check on these points first before making any decisions. Pension transfers can be complicated, so you may wish to get professional advice on these. And if you’re thinking of leaving a defined benefit scheme, where your retirement income is guaranteed, you’ll have to take advice if your benefits are worth £30,000 or more in cash terms.

Time for you to act?

Yes, the pensions dashboard could eventually make life easier for retirement savers. But if you’re approaching retirement and want to manage your different pots more effectively, you could be acting now to help get the best from your lifetime savings, consolidating as much as you can to a single platform.

To help you work out if that’s the right move for you, watch out for our new Consolidator’s Guide series over the coming months, looking at the practical ins and outs of consolidating different types of savings pots, from personal and workplace pensions to ISAs and investment accounts.

Important information

This is provided for general information only and takes no account of personal circumstances. It is not a recommendation to buy or sell. It is provided solely to support you in making your own investment decisions. If you have any doubts as to their suitability you should seek expert advice. Alliance Trust Savings does not give financial or investment advice.

Laws and tax rules may change in the future without notice.

Please be aware that the value of investments can fall as well as rise so you could get back less than you invest.

1Work and Pensions Committee, Pension Freedoms report, April 2018 (paragraph 48 for quote)
2Blog by Baroness Altmann, Pension tracing service moves online, 10 May 2016
3Blog by Baroness Altmann, as above
4FCA, Data Bulletin, March 2018 (see page 3)

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