Should I combine my old pensions?
We offer pensions advice to people in Cheltenham and Gloucestershire. By far the biggest problem we see in this modern world is that our clients have many old pensions and don’t know what to do with them. Adverts on the television and billboards outside your supermarket will tell you to combine your pensions (by moving to them!). But is this right for you?
1) Too many eggs in one basket problem!
Many of my clients worry about combining their pension because they remember the credit curnch of 07 and are- nervous that if they have all of their pension savings in one place that they will be at risk if the pension company falls over. This is not usually a reason to not combine your pensions, but you should think about where you’re putting the money. If you put your pension into an Insurance providers pension, then the whole pot will be insured. If you invest in a wealth platform then only a portion of this will be covered by the Financial Services Compensation Scheme.
2) What about diversification
When we start to learn about managing our investments we always hear the term diversification. And it is very important. Like the too many eggs in one basket problem above, if we have too much invested in one stock or commodity then this leaves us open to a lot of risk that the value of this one item will fall away. So we “diversify”, by buying a range of financial instruments that helps us benefit from the gains, but spreads the risk. However, this is definitely not a reason to avoid combining your pensions, but just points to the importance of knowing what you’re invested in. Modern investing is usually about picking the right fund for you. These “funds”, have a range of stocks and financial instruments in them already and are built specifically for the level of diversification and risk that is right for you.
3) Will combining my pensions make life easier?
It certainly should! But not all pension companies are born equal. Pick one where it will be easy to access your information, easy to get in contact with and easy to review and make change as your life situation changes
I’m a Pensions and retirement nerd and would love to talk you through your options if you’re interested. Parker Financial Advice are independent (IFAs) based in Cheltenham, who choose products from the whole of the market. We want to be your trusted advisers for 20, 30, 40 years…