You will probably amass a range of retirement investments through the course of your professional career. The smart money is on streamlining those assets into a single account.
How many full-time jobs have you had in your career so far? In the HR world, the general rule of thumb is that the average person will change jobs anywhere between three and seven times before they retire – and every time they change employers, the chances are they’ll change retirement funds too.
It’s a low estimate (especially in the modern gig economy), but let’s say you end up changing jobs three times. That means you’ll have amassed three different retirement plans by the time you pick up the fabled golden wristwatch.
Should you consolidate those disparate retirement accounts into a single account? “Yes,” says Carrick Group Commercial Director Anthony Palmer simply. “From an admin perspective alone, it’s nice to have everything in one place. It’s also easier to have one, consistent investment strategy – both for your retirement planning and your other long-term investments. Another consideration is that your linked-investment services provider (LISP) fees are normally cheaper the larger your investment.”
The admin aspect may sound like laziness, but there is a practical benefit to it, too. Of course, you will have fewer emails to read and fewer passwords to remember, but when you need to make changes to your investment strategy you will also have a single, convenient point of contact to go to. When you pass away, your beneficiaries will also only have to deal with a single fprovider, rather than having to go through mounds of paperwork trying to figure out where your retirement contributions went when you were a 24-year-old apprentice starting out in your first proper job.
From a strategic point of view, when you retire you will have to structure your investments so that they continue to grow while providing a steady income to see you through your proverbial golden years. That can be a nightmare if you have multiple accounts, each doing different things. Palmer says that it’ll be easier – and, crucially, more effective – if you bring all your investments under a single management roof. With all your investments in place, your fund manager will be able to structure your investments to best meet your short-, medium- and long-term goals.
While consolidated retirement funds will potentially help you to earn greater investment returns, the easier admin will also help you to cut down platform fees.
What’s more, if you have a centralised, consolidated investment strategy (as Palmer describes above) you will probably need to make fewer adjustments to your portfolios. Again, the less buying and selling (or chopping and changing), the fewer fees you’ll pay and the more you’ll make in returns after fees.
Mind the technicalities
The arguments in favour of retirement fund consolidation are compelling, but the mechanics of the consolidation process can be quite complex. After all, it’s not a simple matter of taking all your money and rebooting your investment strategy. Pension funds need to be converted or consolidated into the same vehicle, so multiple preservation funds will have to be consolidated into a single preservation fund, and multiple provident funds into a single provident fund. Technicalities like this need an expert’s touch, which is why it’s so important that you speak to your Carrick advisor if you are considering a consolidation process.