Should I consolidate two pensions into a SIPP as I approach retirement?

Q. Should I consolidate two pensions into a SIPP as I approach retirement this year?

A. The transition from working life to retirement is a big moment in our financial lives and getting the right financial plan in place is very important.

Ideally, with not long till you plan to retire, you will already know how you want to turn your retirement savings into an income. Some people start this planning as much as 10 years out.

• Read more about retirement income options

Wherever you are in your planning, having a good idea of what you have saved is essential. The great benefit of consolidating pension pots is that it becomes far easier to see how much you have, and then to manage it with minimal admin and fuss.

Self-invested personal pension (SIPP) providers allow you to view your account online so that you always know the value of your total savings, meaning you can react if you feel you are under-saving.

Another plus is that you have far greater control over how your pension money is invested. SIPP providers such as Fidelity Personal Investing offer a wide universe of investments to suit investors of all levels. This compares to the typically limited selection of fund choices inside most workplace schemes.

Having your pots in one place means you can manage the overall level of risk you are taking and ensure that you are not over-exposed to one market or type of asset.

Finally, it may be that your former workplace schemes do not give you the full range of options for accessing your pension money from age 55. A SIPP can offer you these.

• Learn more about our cashback offer on transferring pensions and ISAs

There are a few other things to consider, however, and sometimes it can still make sense to leave old pensions where they are. Some pension schemes charge a fee if you exit with your money. This should be easy to find out and will become apparent if the ‘transfer value’ you are given is lower than the pot value. If an exit fee applies, you need to decide if you’re willing to pay this for the benefits of consolidating.

It is also very important to understand if your old scheme comes with any benefits that you will be giving up by leaving. An old scheme might allow you to take your money earlier, for example, or will perhaps allow you to buy a higher income in the future via a ‘Guaranteed Annuity Rate’ (pensions started in the 1990s and before are more likely to include these).

If an old scheme includes such features, consider whether you will lose out by giving them up.

If you’re still contributing to a work pension it is likely that your employer is paying in something on your behalf as well. If you stop contributing to the scheme, and are no longer an active member, this valuable benefit will likely end. This should be avoided.

Before making your decision, please read our transfer guide which explains the options available and gives you the information you need to know. It's important to understand that pension transfers are a complex area and may not be suitable for everyone.

The government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at www.moneyhelper.org.uk or over the telephone on 0800 011 3797.

Fidelity’s retirement specialists can provide you with free guidance to help you with your decisions. Our advisers use cash-flow modelling tools to help you plot a sustainable - but optimised - plan for income in retirement. They can also provide advice and help you select products though this will have a charge.

It’s important to feel empowered about retirement. So, if you’ve got a burning question you want to ask? Why not drop us a line. Click here to ask your question.

Important information -  investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on personal circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.