Five issues to consider before consolidating pension pots
By Robbie Lawther, 2 Sep 19
Industry changes have made it natural to want to ‘tidy things up’ into one pot – but is it a good idea?
Click on the gallery below to find out why Royal London’s Steve Webb believes you should seek advice first.
5. Missing out on ‘small pot’ privileges for those still saving into pensions.
Taking taxable cash from a defined contribution pension triggers a cut in the saver’s annual allowance from £40,000 to £4,000 via the ‘Money Purchase Annual Allowance’; but taking a small pot under £10,000 does not do so; those who consolidate all their small pots miss out on this privilege.
Unexpected disadvantage
Royal London’s Webb said: “One of the questions I am asked more often than any other is whether people should combine all of their pensions in one place.
“Whilst that may seem the tidiest thing to do and can have some advantages, there are also a number of unexpected disadvantages to merging pension pots.
“Older pension policies may have attractive features which would be lost if transferred, whilst small pots benefit from certain tax privileges which do not apply to larger pots.
“As ever, the best approach is to talk to seek impartial advice or guidance before consolidating pension pots.”
Tags: Consolidation | Pension | Royal London
