Should I Consolidate My Pensions?

Today, it is more common for people to change jobs every few years – and the launch of auto enrolment in 2012 means that you are now more likely to amass more pensions over the years. Managing all these pensions can be tricky, and it’s easy to lose track of them, which is why you might be considering consolidating them into one pot and combining pensions.

However, there are pros and cons to consolidating your pensions, as we explore in more detail below.

What is pension consolidation?

Pension consolidation is when you bring multiple pensions together into one single pot. It can be done through a process called pension transfer, which involves transferring the funds from multiple pension plans into a single plan with one provider. You might choose to do this for a variety of reasons.

You could be signed up for schemes that are charging you high fees, or missing out on investment opportunities because your savings are divided across numerous small funds rather than being in one place. Or you may simply be struggling with the admin involved in managing different plans.

This is where pension consolidation comes in. Put simply, by consolidating your pensions, you have the potential to save and make money in one move.

So it’s a no-brainer then? Not quite. There are caveats, and situations where it is not in a pension-holder’s interests to consolidate.

Should I consolidate my pension pots?

Whether consolidating is the right move for you depends on which pensions you currently have, and on what terms, how competitive the rates are on those funds versus those of the ‘new’ consolidated fund, and what your own personal circumstances are.

For example, a long-time self-employed person, who has independently managed their own pension plans, will be in a very different position from someone who is looking forward to retiring on a final salary scheme. What’s good for one may not work for the other.

Navigating all this can be tricky, which is why we always recommend speaking to a pension advisor, to first establish whether it is worth combining pensions at all, and then how to go about it.

Pension consolidation: the pros

Flexibility is built into most pension schemes for good reasons: personal circumstances change over time, so do the rules governing financial products.

Government advice gives an overview of some of the options available in terms of transferring pensions for all sorts of reasons. More specifically, you might want to consolidate various pension pots into one to reduce the admin time, and the risk of losing one or more.

This is a reward in itself, but there are financial benefits as well. Most pension funds come with an annual management charge (AMC) which varies from provider to provider.

Not only will fewer pensions mean fewer charges, but if you are going to exit most of your funds, you also have the opportunity to quit the ones with the highest charges. The difference between a 1.5% AMC and 2% might not seem much, but it can mean thousands of pounds in real terms.

Putting all of your savings in one pot also means you have a much higher single amount to invest, whether that be in shares, property or another pension.

Pension consolidation: the cons

You’re free to leave a pension scheme early, but it may not be free to do so. Many providers charge you an ‘exit fee’ or something of a similar name, effectively a penalty, to discourage you from leaving them.

If you’re exploring the option of consolidating pensions, you must have all the terms, conditions, fees and charges of each scheme to hand before you make a final decision.

It might turn out that merging or closing funds isn’t the right move at all. Or you might establish that it could be better to leave one fund in place because the exit fee is so high it cancels out any benefits you get from the move.

Likewise, there are other pension-specific perks – such as special benefits for loved ones in the event of your death – that you’ll lose by exiting early. Don’t let ‘grass is greener’ thinking cloud your judgement.

If, for example, you have a good final salary pension scheme, in almost all cases you will be much better off leaving it alone. Tinkering with a scheme like that, or exiting it altogether, could prove to be a serious mistake – not least because you lose the peace of mind that comes with having it managed for you until the end of your working life.

It’s true that one of the benefits of consolidating funds is for the larger investment potential it brings. But there might also be more to be gained from keeping investment pots separate. Some of the Money Purchase Annual Allowance rules only apply to pension funds worth £10,000 or more, so these ‘small pots’ won’t trigger certain clauses to do with your personal annual allowance.

Finally, while it’s natural to want to reduce admin, bear in mind that the government is set to launch a new pension dashboard* designed to improve visibility of your plans and help you to save.

What to consider before consolidating your pensions

First you must establish how many pensions you have, how much is in each, and precisely the terms of each fund. This includes being sure to establish if you have any lost pensions left over from old jobs where your employer enrolled you into a scheme.

Your pension provider(s) must give you all the above details, and explicitly state the amount available for transfer – the ‘transfer value’ – should you choose to exit. It is your right to have all of this information before you choose to do anything.

Equally, ensure that you are fully in the picture at the other end, with your new pension provider. You’ll need to consider the GAR (guaranteed annuity rate), AMC, any fund-specific benefits, or caveats, and the situation if you decide to exit this fund.

Of course, you may have chosen to stick with an existing pension, one that you’re already familiar with, in which case things are slightly simpler. But even then, and certainly with a new provider, transferring and consolidating funds can be complicated.

It’s essential that all of the fine details are taken care of, because after a grace period of 30 days, most decisions are irreversible.

Speaking to a pension advisor

It can be daunting enough to choose and manage one pension scheme. For the above reasons and more, deciding between half a dozen schemes, all with different charges, fees and rates, while actually managing the closure of various funds, can be even more confusing.

This is where a good pension advice service comes in. As a general rule, do not make a final decision until you’re absolutely certain you’re doing the right thing, in the right way. Our pensions advisors are experts in this field and are on hand to give you the advice you need.


Can I consolidate my pensions?

Yes, you can consolidate your pensions by moving all your various pension pots into one place. This process can help simplify your retirement planning, reduce costs and make it easier to manage your savings. However, it’s important to remember the potential drawbacks, such as exit fees or loss of certain benefits from your existing pension plans. It’s recommended to seek professional advice before making a decision to consolidate your pensions, and that’s where Almond Financial can help.

Is it worth consolidating pensions?

Consolidating pensions can certainly be worth it for some individuals, but it depends on your unique circumstances. By bringing all of your pensions together, you can have a clearer view of your retirement savings and potentially reduce the amount of fees you’re paying, especially if some of your pensions have high charges.

However, not all pension schemes are the same. Some may have valuable benefits that you could lose if you transfer out. Others may charge you a fee for moving your pension. Before consolidating your pensions, it’s important to weigh the pros and cons, and consult with a financial advisor.

How can I track down and consolidate my pensions?

If you’ve had multiple jobs throughout your career, it’s possible you’ve also had multiple pensions. Here are the required steps to track down and consolidate your pensions:

The first step is to gather details about all your pension schemes. This includes the provider’s name, your policy number, and the estimated value of the pension pot. If you’re unsure about the details of a pension or have lost contact with the pension provider, the UK Government’s Pension Tracing Service can help you find contact details.

If you’ve completely lost track of your old pensions and aren’t sure where to start, check out our guide: How to Find Your Old & Lost Pensions

Before moving your pensions, review the details of each one. Look for any guaranteed benefits you might lose or any exit charges that might apply.

After seeking guidance from a financial adviser, if you decide to go ahead, you’ll need to choose one pension to move all your other pensions into. This could be a pension you already have, or a new one that you open. Consider factors like charges, investment options and any additional benefits.

Once you’ve chosen a pension to consolidate into, you need to contact the provider and initiate the transfer process. In most cases, they will handle the process for you.

Remember, consolidating pensions is not the best choice for everyone, so it’s important to take your time and consider all of the factors involved.

*Clicking on an external link means you will be departing from the regulatory site of Almond Financial. Neither Almond Financial nor Quilter Financial Planning are responsible for the accuracy of the information contained within the linked site.

Tax treatment varies according to individual circumstances and is subject to change.

Transferring out of a Final Salary scheme is unlikely to be in the best interests of most people.