Warning to anyone with more than one pension pot and the checks you need to make

Warning to anyone with more than one pension pot and the checks you need to make Pension consolidation can make your retirement savings easier to manage - but not every pension should be transferred, as you could lose benefits If you've changed jobs a few times over the years, there's a good chance you've built up more than one pension pot without even realising it. One from your first job. Another from an employer you stayed with for a few years. Perhaps another from a company you barely remember working for. Before long, your retirement savings are spread across several providers, all with different charges, investments and paperwork. Bringing those pensions together, known as pension consolidation, can make your retirement savings much easier to manage and, in some cases, could even leave you better off by reducing the fees you pay. However, experts warn there's one important catch: not every pension should be transferred. Some older pensions contain valuable guarantees or benefits that could be reduced or lost if you move them. Please note: This article is intended as general information and not personal financial advice. Whether consolidating your pensions is right for you depends on your individual circumstances. Always check what benefits you could lose before transferring any pension. Why many people have several pension pots Automatic enrolment means most employees are now paying into a workplace pension, which is good news for retirement savings. But every time you change jobs, you will usually leave one pension behind and start another. Over a working lifetime, it's easy to build up several pension pots and lose track of where they all are. If you're unsure where your old pensions are, start by using the Government's free Pension Tracing Service before considering whether to consolidate them. Could combining your pensions save you money? Combining pensions doesn't increase the amount you've saved. If you have four pension pots worth £25,000 each, you'll still have £100,000 after transferring them into one place. Where consolidation can make a difference is through charges. If your new pension has lower annual fees than your old schemes, more of your investment returns stay invested instead of being eaten away by charges year after year. Over 20 or 30 years, that difference can become significant. Illustrative calculations suggest that someone aged 40 with £150,000 spread across several defined contribution pensions who reduced annual charges from 1% to 0.5% and remained invested until age 65 could retire with tens of thousands of pounds more , depending on investment performance and other factors. Consolidation can also make retirement planning easier because you'll have fewer accounts to monitor and less paperwork to keep track of. Illustrative example only: The figures above are based on hypothetical assumptions about pension charges, investment growth and the length of time the money remains invested. They are not a guarantee of future returns, and your outcome could be higher or lower. Jasmine Birtles: 'Don't assume every pension is the same' Jasmine Birtles, founder of MoneyMagpie, said: "The mistake isn't having several pensions. The mistake is assuming they're all the same. One old pension could be quietly charging more than it should, while another could contain guarantees that would be incredibly expensive to replace." "Consolidating your pensions can make excellent financial sense if it reduces charges and makes your retirement savings easier to manage. But every pension deserves its own health check before you move a penny." She adds: " Your pension is one of the biggest financial assets you'll ever own. Spending a little time understanding what you've got before making any decisions could be one of the most valuable financial jobs you ever do." Which pensions are often suitable for consolidation? Many people choose to consolidate: - Old workplace defined contribution pensions. - Personal pensions. - Stakeholder pensions. - Auto-enrolment pensions from previous employers. - Some self-invested personal pensions (SIPPs), depending on charges and investment options. These pensions are based on the amount contributed and how investments perform. If a newer pension offers lower charges or better value, transferring may be worth considering. Which pensions should you check very carefully? Some pensions include valuable benefits that could be lost if they're transferred. Final salary (defined benefit) pensions These provide a guaranteed retirement income based on your salary and years of service. They are often among the most valuable pensions available, and most people are likely to be better off keeping them unless specialist advice suggests otherwise. Pensions with guaranteed annuity rates Some older pensions promise a higher level of retirement income than can be bought today. Those guarantees may disappear if you transfer. With-profits pensions Older with-profits pensions can include valuable terminal bonuses that may be reduced or lost if you move the money elsewhere. Protected pension age Some older schemes allow you to take your pension earlier than current rules normally allow. A transfer could mean losing that protection. Enhanced tax-free cash Certain historic pensions allow more than the standard 25% tax-free lump sum. Moving the pension could remove this entitlement. Workplace pensions with added benefits Some employer schemes include life insurance or ill-health benefits that don't automatically transfer with the pension. One group should be especially careful If you have a pension worth less than £10,000 , don't automatically assume you should combine it with your other pensions. Depending on how you plan to access your retirement savings, keeping a small pension separate can sometimes be more tax efficient under the pension "small pots" rules. Five checks before transferring any pension Before moving any pension, make sure you know: - What annual charges you're paying. - Whether there are exit fees. - If you'll lose guarantees or protected benefits. - Whether the new pension offers better value. - How the transfer fits into your long-term retirement plans. Before you make any decision Take time to understand exactly what each pension offers before transferring it. If you're unsure, consider using the free guidance available from MoneyHelper or speak to a regulated financial adviser. This is particularly important if you have a final salary pension or another scheme with valuable guarantees. Having several pension pots isn't a problem in itself. The real issue is not knowing what you've got. For many people, consolidating straightforward defined contribution pensions can make retirement planning much simpler and may even reduce the amount paid in charges over the years. But don't assume every pension belongs in the same place. Some older schemes are valuable because of the guarantees hidden inside them, not simply the amount of money they contain. A couple of hours spent reviewing your pensions today could make your retirement easier to manage and help you avoid an expensive mistake tomorrow.