Martin Lewis issues urgent warning for anyone with multiple pension pots

Martin Lewis
-Credit: (Image: ITV)

Renowned money-saving expert Martin Lewis was joined by pension specialists on his latest BBC podcast to tackle some of the most pressing concerns listeners have about their retirement funds. He highlighted that the "biggest single pension question we have had" revolves around the issue of whether to merge various pension pots.

It's common for individuals to accumulate several pension pots over time, often as a result of changing jobs or by setting up additional private pensions. Addressing this issue, one listener asked: "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?"

The head of guidance at the Money and Pensions Service, Charlotte Jackson, weighed in on the matter, stating that consolidating pensions is a deeply personal choice, and she personally prefers to "things neat and tidy in one place". However, she cautioned: "There is a big cautionary 'but' in there," which prompted a chuckle from Martin as he probed: "What's your big but Charlotte?"

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Charlotte then explained the importance of being informed before making any consolidation decisions: "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 pointed out that there's "nothing wrong with being biased towards consolidating because it makes your life easier" as Charlotte highlighted the key considerations for individuals pondering over pension consolidation.

Charlotte underscored the importance of understanding the specific benefits and features of different pension pots, such as defined benefits and special provisions that could impact a spouse in the event of death. She stated: "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."

She cautioned that these details are often "the devil in the details" and advised savers to also consider how they may wish to manage their funds in the future. Charlotte elaborated: "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."

Adding to the discussion, Mihir Choughule from Tideway Wealth posed an additional reflection: "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.

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