The nature of the jobs market has changed a great deal in the last few decades. No longer does someone join a company straight after education and stay there for the entirety of their working life, but instead, new roles can be sought every few years as people strive to make their way up the ladder.
This means people can amass a significant number of workplace pensions during the course of a career, but as a result, some of those pension pots could be misplaced, which is why consolidation is becoming an increasingly necessary route. But would you consider such a thing, and are you even aware that it's an option?
According to Aegon's latest UK Readiness Report, there's a clear lack of consumer awareness surrounding pension pot consolidation. The figures show that 59% of the UK population are unaware of the benefits of such a route, and 68% have never even considered consolidating.
This is despite the fact that 37% of respondents have more than one pension pot, and a worrying 22% are unaware of how many pots they have, which means that the number of those with multiple pension pots could be even greater. This lack of engagement could have "significant implications for savings levels", it said in the report, and with auto-enrolment well underway, an increasing number of people could find they have multiple pension pots in the years ahead.
Arguably, consolidation is something that should be more heavily focused on, particularly with 92% of respondents currently falling short of their retirement targets. Understanding consolidation and its potential benefits could make a huge amount of difference, but as yet, confusion largely reigns.
For example, 15% of respondents incorrectly believe that consolidating their pots would have a negative impact on their retirement funds and would result in higher management fees, while only 25% correctly believe that it would reduce those costs. Among those nearing retirement (those aged 45-65), 66% are completely unaware of the benefit that consolidation could have on fees.
Mark Till, of Aegon UK Direct, comments on the findings, and explains why consolidation can be so beneficial: "With 92% of the UK working population still falling short of their retirement targets, the need to consolidate multiple pension pots is more important than ever before.
"By not doing so, people incur multiple management fees from the different pension providers. These eat into the value of retirement funds, and people need to start understanding that such a move can only be a cost-effective one for them.
"Consolidation also makes engagement more efficient. It is nonsensical for people to have consumer packages such as broadband or utility packages in their daily lives, but not want the same for their pension. When pots are spread widely it can stifle engagement and lose you money you didn't know you had, so in a sense, more pension consolidation in the country can help drive up engagement and awareness with pension provisions."
So, the message is clear – if you've got several pension pots that you've accumulated throughout your working life, speak to your pension provider(s) about consolidation. Not only can it reduce the fees you have to pay, but it could boost your engagement with your pension, and having a full understanding of your pension fund and the level of income it could generate can help you see how close you are (or otherwise) to achieving your retirement goals.
Find out more about workplace pensions and automatic enrolment
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