For construction professionals who have built their careers across several different building contractors, projects and employers, pension planning doesn’t always sit at the top of mind. Mobility is what entices many to the trade itself but, all too soon, scattered pension pots and legislative changes, some of which were most recently highlighted in the Autumn Budget, can force construction experts to rethink their retirement strategies.
The hidden cost of career mobility
Throughout their working life, the average UK worker changes jobs approximately every five years. The construction sector is generally quite mobile due to the project-based nature of the work, with workers moving between sites and companies as projects finish or new opportunities arise. Many often line up their next job before the current one ends to avoid extended periods of unemployment.
Each new contract or site typically means automatic enrolment into a new workplace pension scheme, ensuring continuous savings through employer and employee contributions. What this does, however, is create a trail of multiple, scattered pension pots with different providers. Each one has their own rates, management fees, and levels of performance.
While annual management charges may seem marginal, over the course of several decades throughout a contractor’s working life, the charges undoubtedly build up, with potentially thousands paid in fees for pensions not even being used or regularly contributed to. Managing multiple separate pensions, each with their own fee structure, can cause a dramatic drain on your cumulative retirement savings.
Understanding the “find and combine” pension approach
The “Find and Combine” methodology offers construction professionals a systematic way to regain control of their retirement planning. This involves three key stages:
- Finding all your existing pension pots
- Evaluating their terms and performance
- Consolidating them where it makes sense
Locating All Your Individual Pensions
It’s easy for working professionals to lose track of all their pensions from every one of their previous employers, especially when some get acquired, restructured, or when personal circumstances force changes of address. The government’s Pension Tracing Service provides a free tool for workers to find contact details for old workplace and personal pension schemes. Recent data suggests there’s roughly £31.1 billion of unclaimed defined contribution pension funds in the UK. For construction professionals who’ve moved between sites and contractors regularly, there’s a high chance that there’s one or two schemes lying around. You can find and locate them yourself or pay a nominal fee to have a financial expert do this on your behalf.
Evaluating your options
Once you’ve located your pensions, the next step is gathering detailed information about each one. It’s vital to understand the transfer value, annual management charges, investment performance and any special features or guarantees attached to each scheme. Be mindful that some pensions carry exit fees for early transfer, which can sometimes negate the benefits of consolidation. Meanwhile, others might include valuable guaranteed annuity rates or enhanced death benefits that would be lost through transferring to another active provider. This evaluation phase is where professional guidance on pension consolidation becomes particularly valuable, helping you avoid costly mistakes that affect your life at retirement.
Making strategic decisions
While it’s comparatively easier in terms of administration, consolidation isn’t always the right move for every pension pot. Defined benefit (final salary) schemes, for instance, should typically remain untouched, as they provide guaranteed income for life that’s difficult to replicate elsewhere. Similarly, pensions under £10,000, known as small pension pots, might be better left separate due to specific regulatory rules regarding how they may be accessed.
However, for most defined contribution pensions accumulated through site-to-site work, consolidation can deliver clear advantages.
Key benefits for construction professionals
- Simplified administration – managing one pension statement instead of dozens makes it far easier to track progress towards retirement and projected savings once you stop working.
- Reduced fees – consolidating pensions into one pot can lower overall spend on management fees. Small reductions in fees across a pension pot builds up into valuable additional funds over time.
- Better investment options – larger, consolidated pots can unlock access to funds with higher minimum thresholds and potentially superior returns. These may not be available across smaller, scattered pots.
- Improved planning – with all savings visible in one place, it’s easier to make informed decisions about retirement timing, income requirements and tax planning.
Before consolidating pensions, construction professionals should be aware of the risks. Exit fees can sometimes outweigh the potential gains, and they might lose certain scheme-specific benefits, such as death benefits for dependants. Tax implications also vary between pension types and where it may be moving to, so it’s worth considering how consolidation may impact a person’s overall tax position.
For construction professionals nearing the end of their careers, reviewing pension arrangements should be done sooner rather than later. Obtain as much information as possible about each provider’s pension transfer values, fees, and benefits, and consider seeking independent financial advice, particularly if you have complex arrangements or substantial savings. The cost of impartial guidance is recovered several times over through more informed decisions and fee savings.
