Do you have multiple pensions? Here's why you should consider combining them into a single pot.

The obvious question you might ask from this statement is, why would I want to combine my pensions? The simple answer is that fewer pensions mean less administration and, therefore, less hassle.

However, there is also a potential financial benefit from combining your pensions. For instance, you could end up paying less in pension charges if you combine multiple pensions into a single pot.

Another reason for combining your pensions is that it will allow you to eliminate any underperforming plans. At best, such pensions will not contribute to your retirement fund. However, they could well be eroding your funds and jeopardising your retirement lifestyle. You should seek regulated financial advice before deciding to do so, check out Portafina.

How could you have multiple pensions?

Today, it is relatively common for people to have more than one pension plan. That is because, since 2012, employers have been required to enroll qualifying employees into a workplace pension scheme. To qualify, you must be earning over £10,000 a year and be at least 22.

If you have had multiple employers throughout your working life, you could well have as many pensions as you've had jobs. Unless you have opted out of the workplace pension schemes, you could have a considerable amount of money for your retirement, which you are unaware of. Locating these pensions and combining them into a single fund will make it easier for you to keep track of your money.

How can you trace old pensions?

If you think you have some old pensions out there and you need to recover them, you have a couple of options:

• Use the Pension Tracing Service on the gov.uk website.
• Engage an independent pension tracing company.

Using the government's pension tracing service is relatively straightforward. However, there are limitations to the information you can access. Alternatively, plenty of companies are available to help you trace all pensions, but I will still use the government's Pension Tracing Service as a starting point.

However, before engaging the services of one of these companies, you should fully understand what you are committing to when agreeing to have them track down your old pensions.

How pension-combination can reduce your fees.

Each one of your pension plans will have a certain level of charges. Some may be transparent and straightforward to understand, while others may be far from clear. You might think that a tiny charge difference, of say 0.5%, is insignificant. However, these can have a significant effect on your funds over the lifetime of your pension. Failing to combine your pensions into a lower-charged plan means you could lose a lot of money.

Combining your pensions.

If you are so inclined, you can combine your pensions by yourself. However, many people are either not confident in dealing with pensions or would rather have someone else do it for them.

There are specific companies that will combine your pensions on your behalf. All you have to do is provide them with the information they need on your existing plans, and they will incorporate them into a single pension. However, you also might consider using a regulated financial advisor to combine your pensions.

Combining your pensions through a financial advisor.

If you use a specialist pension combining company, that is all they will do. They will not look at your plans and assess the benefits of each one. Combining your pensions is their primary aim for these companies, so you could end up paying higher charges than you did previously.

Whereas a regulated financial advisor will assess your current pensions before recommending whether you should combine them or not. For instance, they may recommend keeping certain pensions isolated because they offer unique benefits that combining would eradicate.

Of course, using a financial advisor usually involves a fee. However, you should not let this put you off. An ILC report from 2019 demonstrated that those people who use the services of a regulated financial advisor could amass more than £30,000 more money in their pension funds than those who do not.

Finally, if you think you can combine your state pension entitlement with any private pensions you might have, think again. The State Pension is a benefit you receive from the government, having met the qualifying criteria. Therefore, you cannot include this in any of your pension combining plans.