Martin Lewis expert sends out warning over multiple pension pots

Martin Lewis
-Credit: (Image: ITV)

Finance guru Martin Lewis was joined by some pension experts on his BBC podcast to answer some of his fans’ burning questions about their later life spending. In particular, he noted that the “biggest single pension question we have had” involved consolidating pots.

Many people may find they have multiple pension pots, usually collecting them as they change jobs throughout their career or choosing to open multiple accounts of private pensions alongside them. However, as one fan on X questioned: “Would you say it’s more beneficial to keep all of my different work pensions separate or collate them into one pension pot to be managed together?”

Charlotte Jackson, head of guidance at the Money and Pensions Service, suggested that this is often a very personal decision dependent on the saver as she revealed she chooses to have “things neat and tidy in one place”. However, she added: “There is a big cautionary ‘but’ in there,” earning a little giggle from the podcast host as he questioned: “What’s your big but Charlotte?”

She revealed: “You need to know you’re not giving anything up and there are some really good reasons as to why you might not want to consolidate everything. Don’t automatically jump in to say; ‘I’m going be neat and tidy and put it all in one pot’, ask some questions. Keeping some separate is helpful sometimes.”

Martin clarified that there’s “nothing wrong with being biased towards consolidating because it makes your life easier” as Charlotte explained some of the questions people should ask themselves before deciding whether or not to consolidate their pensions into one pot.

She emphasised that savers need to ask what type of defined benefits and special features they may be getting in different pension pots, regardless of how much money they actually have in each investment. She explained: “It might mean that you don’t have very much money in it but it will bring you lots of other benefits like if you die it will protect your spouse for example.”

The expert warned this information is often “the devil in the details” but another thing savers should considering before their decision is whether they “might want to treat (their money) differently” in the future. Charlotte continued: “Having a couple of separate pots will enable you to maybe make a range of different options and treat them differently and that can be really useful for tax purposes.”

Mihir Choughule, wealth manager Tideway Wealth, added one more question for listeners to reflect on: “It really depends at what stage of your life you’re in.

“If you’re accumulating and let’s say you’re in your 20s or 30s, chances are the pension assets you have are not going to be complicated and esoteric, so consolidation probably makes sense. Probably being the keyword. Whereas if you’re in your 40s,50s,60s, approaching or thinking of retirement and your focus is on preservation not just accumulation then it probably might make sense to have separate pots so that each pot does separate things.”

Martin summarised: “The younger you are, the easier it is, the simpler it is to consolidate,” while also emphasising for listeners that the panel were “generalising” their advice as everyone’s financial situation is unique and may not benefit from these strategies.