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Pensions Consolidation

Working together for a secure future

It’s never too early to make plans for retirement. At Mercer & Hole, we work with you to make provision for the future – your own and if you are a business owner, your employees’. 

What we offer

We use our expertise across the board to make your money work for you so that you can realise your goals and ambitions now and for the future in the most tax efficient way.

I’ve left planning for retirement and I’m in my 50s – have I left it too late?
It’s never too late to plan for retirement. Of course, the earlier you take action, the better, so don’t delay setting up a pension to ensure that you have enough to live on when you retire to do the things you want to do and achieve your life goals. The options and considerations you have in your 50s will be very different from say, in your 20s, but your pension portfolio will account for this provided you seek help and advice from a professional.

Are pensions taxable?
A basic rate taxpayer who has paid £100,000 into their pension will have received 20% tax relief, leaving them with a £125,000 pot. When drawing out (and assuming the value is the same so no growth or reduction in value) they can take 25% of that – £31,250 – as a tax-free lump sum. The rest is taxed at their marginal rates of Income Tax at that time.

Essentially, the combination of tax relief and returns on investment mean that pensions can potentially provide a better hedge against inflation that many other investment options.

Can I have more than one pension?
Yes, you can have several pensions and individuals often find they accumulate pensions from different workplace schemes as they change jobs. However, consolidating your pension into a well-balanced portfolio with advice from a professional often allows for easier performance tracking and overall management.

Frequently asked questions

How much do I need to retire?

How long is a piece of string? Before you calculate how much you need on retirement, we would advise sitting down and identifying your goals, which will then inform how much you will need to invest to achieve these. However, once you decide on a regular amount to put into a pension fund, this can be altered and amended as your circumstance and goals change throughout your life.

What is a defined-contribution pension?

A defined-contribution pension is a pension plan where you and/or your employer pay in a regular amount to your pension plan. The amount you get on retirement depends on how much is put in and how much this money grows including investment returns and tax relief. This is the most common type of pension plan.

What is a defined-benefits pension?

A defined-benefits pension is one where the benefit payable is based on how many years you have been a member and your salary over that period or when you leave or retire.  They are increasingly less common and apply more to individuals working for large companies or in the public sector.

I have several pensions – is it better to put them all into one pot?

At Mercer & Hole, we would always advise you to take advice before consolidating your pensions, just to make sure that you understand the implications. Please don’t hesitate to get in contact with us if you are in a position where you want to review your pensions so that we can help to identify your needs and a suitable pension with a well-balanced portfolio to help you achieve your goals.

How does tax relief work on pension contributions?

The UK government likes to reward individuals for saving towards retirement and given the tax benefits available through them, pensions offer one of the best ways to do so. Essentially, tax relief is available on your pension contributions at up to the highest rate of income tax you pay.

  • Basic-rate taxpayers get 20% pension tax relief
  • Higher-rate taxpayers can claim up to 40% pension tax relief
  • Additional-rate taxpayers can claim up to 45% pension tax relief

If you are interested in setting up a pension and would like to find out how much you can save in tax relief, please don’t hesitate to contact our Financial Planning team.

What is trivial commutation?

Trivial commutation rules concern taking out pensions savings as a lump sum. Taking out cash this way is taking a ‘trivial lump sum’, however, with increased pension flexibility, this is becoming less common.

Can I work part-time and still receive pension income?

It is possible to work part-time and still receive pension income.

Can my pension be passed on free of IHT?

In theory, anything that belongs to your estate comes under IHT, however, in most cases, pensions can be passed outside of your estate, so won’t be subject to IHT. At Mercer & Hole, we work with our clients to consider the wider picture when planning their pensions to include considerations such as IHT, tax savings in general and other investments to ensure they get the best return on their investments.

When are pensions benefits tested against the lifetime allowance?

If the total value of your pension benefits exceeds the lifetime allowance, there will be an additional tax to pay on the excess at some stage.

If I’m over the lifetime allowance, should I opt out of my workplace pension?

Ultimately, if you breach your lifetime allowance, you will end up with a bigger pension, despite the lifetime allowance. We would advise you to seek professional advice before you opt out of your workplace pension.

Can pensions only be passed on to my family?

Defined contribution pensions can be passed on to anyone. It is therefore important to set out your wishes on a suitable form that you can then give to your pension provider.

Are there any downsides to consolidating pension pots?

There can be many unforeseen consequences when moving from one pension to another. The best approach is therefore to seek professional advice before doing so.

Can you have joint pensions with a spouse or partner?

Most pension plans can only be held by one individual. You can pass on a pension to a loved one upon your death though.

Financial Planning Specialists

Meet our people >

Why work with us?

There is a huge amount of crossover with tax and financial planning advice and we believe that clients benefit from the comprehensive, professional advice where both our tax and financial planning teams are working together.

  • Industry recognition
    Industry recognition

    We are members of the Family Resolution panel made up of accountants, family lawyers and other professionals committed to the constructive resolution of family disputes

  • Sector Knowledge
    Sector Knowledge

    Retirement Planning, Court of Protection, Expert Witness, Divorce, Family & Pensions, Estate Planning

  • Cross Team Expertise
    Cross Team Expertise

    We offer you a truly joined-up service, with both our financial planning team and private client tax team working together to give you the best possible advice

  • Accessibility

    Four Offices: London, St Albans, Rickmansworth and Milton Keynes