Q

What is pension consolidation?

A

It's the process of merging all the pensions from every job you've held into one.

Count the number of companies where you’ve worked. If you, like most of us, have had more jobs than pets, significant others, and ties combined, you’ve probably accumulated a ragged group of pensions from your various employers. Some may be great, but we doubt it. Chances are, if your employer administered them, they will be either badly invested, larded up with excessive fees, or both, and the effect this drag can have on your comfort in retirement cannot be overestimated.

If this is the case, you should consider taking control of this ungainly collection with pension consolidation. It’s exactly what it sounds like — rolling up all your pensions into one account in which you’ll be able to make all the investment decisions. A natural choice would be to roll them up into a self-invested personal pension (SIPP) — an account you can set up at any brokerage, though we’ll humbly suggest you try Wealthsimple on for size.

A couple notes of caution. Read the small print on any employer-sponsored plan and make sure that it doesn’t have exit penalties so significant that they’ll be impossible to make up over time with a better plan (something especially of concern if you’re older than 50 — that is, not so many years away from retirement age.) Naturally, if you’re still employed at a company and it offers a program of matching funds on any contribution you make, you certainly don’t want to turn down any of that free money by converting the account to a self-invested pension. So by all means consolidate, but do so with your eyes wide open.

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