economy
Pension 'merging' error could wipe £10k off your pot and make you work longer
PENSIONERS who are worried about an inheritance tax raid are being warned not to make a costly mistake that could see them lose thousands of pounds in retirement.
TL;DR
- Pensions will be subject to inheritance tax from next April, prompting some savers to consolidate their pension pots.
- Consolidating multiple pension pots into one may lead to the loss of valuable benefits, such as protected pension ages allowing earlier access to savings.
- Some pension schemes offer guaranteed annuity rates that can be significantly higher than current market rates, and transferring could mean losing these guarantees.
- Defined benefit pensions provide a guaranteed income for life, and transferring out of them can mean giving up valuable benefits; financial advice is usually required for such transfers.
- Exit fees charged by some pension providers can also reduce the value of a pension pot if transferred.
- It is estimated that 49,000 estates will be affected annually by the rule change.
- Workers typically have multiple pension pots due to changing jobs throughout their careers.
- Seeking professional financial advice is recommended before making any decisions about pension consolidation.