Scheme (SERPS), your relative is in effect giving up this state pension 'top-up' in favour of an additional payment into his personal pension - made by the Department for Work and Pensions.

A stakeholder pension is designed to provide a low-cost means of saving towards retirement over the long term.

Given that you describe it as a small personal pension, it's also unlikely that your relative will lose any benefits by consolidating.

and cons of consolidating debt-54and cons of consolidating debt-58

Consolidating helps to tidy up the paperwork and identify the value of total pension contributions and how much these are likely to provide at retirement.

From an organisational point of view this is a good thing.

Anyone earning more than over £75 a week and had not “contracted out” would have been building up an additional pension under SERPs.

Instead, benefits are reliant upon investment growth and sufficient funding in order to obtain a pot large enough to provide sufficient income when you retire.

Therefore, transferring funds from the personal pension will help boost the stakeholder pot.

Charges are very low, with annual management charges capped at a maximum 1.5% for the first 10 years.

Stakeholders normally accept transfers in from other pension arrangements, including personal pensions and occupational pensions; there is also no charge should your relative wish to transfer to an alternative pension at some point in the future.

As a guide, a minimum of 10% of gross salary should be allocated to a pension over a period of 40 years, in order to create a pension fund large enough to provide an income equal to half the final salary on retirement.

The pros and cons of consolidating pensions Pros: SERPS was the name of the government’s additional pension scheme that lasted until April 2002 and it is now called the State Second Pension (SP2).

With company-sponsored stakeholder pensions, the contribution made by the employee is deducted from their salary before payday.

Although there is no obligation, the employer usually makes an additional contribution to the plan on behalf of the employee.