Martin Lewis and his pension panel were back to answer more questions from listeners and one fan’s query about consolidating their pension pots was the ‘biggest’ they’ve had
Money-saving guru Martin Lewis has heard from a panel of experts on his BBC podcast as fans were warned that opting to consolidate all pension pots may not be the best route for everyone. In the recent episode of his popular finance-oriented podcast, Martin Lewis was joined by various pension experts to address some burning questions about future financial planning.
He pointed out that one query predominantly raised by listeners was the issue of consolidating their pension pots. People often end up with numerous pension pots over the course of their career, typically accumulated as they switch jobs or decide to open multiple private pensions in tandem.
A listener on X, formerly known as Twitter, posed the question: “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, said the decision is usually a very personal one. She disclosed her preference for keeping “things neat and tidy in one place”.
However, she highlighted a significant caveat, stating: “There is a big cautionary ‘but’ in there,” At this point, Martin Lewis seized the opportunity for a playful jab, asking: “What’s your big but Charlotte? “. She went on to say: “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 affirmed that there’s “nothing wrong with being biased towards consolidating because it makes your life easier”, as Charlotte provided a list of questions that individuals need to consider before choosing to consolidate their pensions into a single scheme. Charlotte drilled home the importance of understanding what kind of defined benefits and unique features each individual pension scheme may offer, regardless of the amount of money held in each.
She continued: “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 such information is often “the devil in the details”. Another factor to bear in mind, she said, is whether they might “might want to treat (their money) differently” in the future.
As Charlotte went on: “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.” Further elaborating on the topic, Mihir Choughule, from wealth manager Tideway Wealth, threw in one more question for those pondering over their decision: “It really depends at what stage of your life you’re in.”
The financial expert advised: “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 added: “The younger you are, the easier it is, the simpler it is to consolidate,” while also signposting for listeners that the panel were “generalising” their advice as everyone’s financial situation is distinct and may not benefit from these strategies.
