With a staggering 59 percent increase in search trends for ‘retirement planning’ this December, it’s clear that individuals are actively seeking guidance to ensure a secure and fulfilling retirement.
Deciding when to take retirement is not an easy decision as it requires a significant amount of strategic and financial planning to ensure a smooth transition.
Whether one is just entering the workforce or plans to stop working in a few years, it’s never too early – or too late – to save for retirement.
However, by the time one enters their 50s or 60s, they might feel they haven’t saved enough to avoid worrying about financial security in retirement.
But there’s always time to make changes. Britons can consider different options to protect their assets, build credit, and maintain and grow their investments for a financially worry-free future.
In light of the increasing interest in retirement planning, the team at Arbuthnot Latham have shared their strategies designed to help people get a clearer picture of their pension pot options, a question that seems to come up a lot when people are asking for advice on planning their pensions.
An expert advisor has highlighted the pros and cons of having a single pension pot.
Paul Clifton, Wealth Planning Director at Arbuthnot Latham said: “Consolidating pensions under one roof can be tempting, but pension transfers are heavily regulated for good reason. So, I would always suggest taking expert advice.”
He encourages savers to consider both the pros and cons of having a single pension pot before taking any action that could affect their future savings.
The Pros: Opting for a consolidated pension pot offers “a multitude of advantages that extend beyond the realm of simplicity”.
For example people can save time and effort on all the admin upkeep of each account and the one account can be managed online and seen in it’s entirely.
Additionally, it allows for a more unified pension pot which is synchronized with any approach to wealth management. Furthermore, consolidating pension funds often translates to lower costs, contributing to overall financial efficiency.
Other pros include:
- Broader spectrum of investment choices as an expert manages the portfolio on one’s behalf, ensuring a tailored and proficient approach to wealth accumulation.
- The flexibility of access to more modern pension funds is a notable benefit.
- The potential to pass the pension fund to a beneficiary outside of one’s taxable estate for Inheritance Tax (IHT) purposes adds a layer of strategic planning to the mix.
The Cons: People must consider the financial implications, including the possibility of encountering higher costs. It is essential to recognise that certain company schemes, in particular, may offer low charges that could outweigh the advantages of consolidation.
Another noteworthy drawback involves the potential loss of benefits associated with older pensions. These may encompass valuable features such as guaranteed income, growth rates, and a higher tax-free cash entitlement.
Furthermore, individuals contemplating the consolidation of their pension pots should be mindful of additional costs that may arise, such as advisory fees and potential exit penalties associated with the transition to a new scheme.
The decision to consolidate should be made judiciously, taking into account the value of these benefits and their significance in the broader financial context.
