The cost to consolidate your funds

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Question: I have held three different jobs in 10 years and each employer has started a new pension fund for me.

I haven’t withdrawn any of the money, but it means my retirement savings are in three different places. Is there any benefit to combining them into a single fund? Are there costs and how does one go about it?

There are several things to consider when deciding whether or not to consolidate your retirement savings. There are advantages and potential pitfalls.

Firstly, you must consider the fees you are paying on the different funds. Fees play a big role in the performance of your retirement investment and even a small difference in fees can have a material effect on your end value.

Also, most platforms charge admin fees on a sliding scale, meaning that as the amount you save gets larger the admin fee gets lower. This is why it would be prudent to compare fees, find the platform that offers you the lowest fees for your specific choice of underlying investments and combine all three onto that platform.

The second benefit would be that it is far less complicated to administer and track the performance of one investment. No sacrifice is necessary in terms of diversification, because you can split the underlying investment into as many different vehicles or funds as you choose, and many platforms now allow not only unit trust funds for the underlying investment but direct shares as well.

It is just easier to monitor when everything is combined.

You may, however, face potential difficulties. Firstly, some older retirement annuities may charge a transfer penalty. This penalty is calculated based on fees and commission, which may have been incurred initially but charged over the life of the policy under the agreement that you would remain in the policy for a certain amount of time.

It is necessary to find out if there is a penalty and, if there is, whether the benefits of transferring would outweigh the costs.

Secondly, you must bear in mind that some retirement funds have guarantees and risk benefits. Find out and then decide if it is worth remaining in the structure to receive those benefits.

Overall, as time passes, the competitive nature of the financial services industry ensures products become more transparent, efficient and flexible. The best option ten years ago may not be the best choice now.

That being said, it is also not a good idea to change course too often, so it is best to seek professional help if necessary.

If you decide to transfer, your financial adviser or the institutions with whom you are invested or intend to invest, should facilitate the transfer. I recommend you speak to an independent investment adviser unaffiliated with any particular product provider for objective and unbiased advice.

Mikayla Collins is a private wealth manager with NFB Private Wealth Management.

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