Should you consolidate pensions?When you start to think about retirement you will probably find you have a number of different pensions with different employers you have worked for and the question many people ask is… “should I consolidate pensions?”

When we say consolidate we mean transferring lots of different smaller pensions into one big pension pot. This may be to consolidate pensions into your current employer’s pension or into a brand new personal pension.

The information in this article relates to money purchase pensions. The type you save into and the value is based on how much you have contributed and what the investment performance has been like. These are very different to final salary pensions and deciding whether to transfer final salary pensions is a whole different area which we will write about separately.

Whilst on their own lots of smaller pensions might not feel like much, when you combine them you may find you have a much larger overall pension than you thought which will give you far more options in retirement.

Before even considering to consolidate pensions you may not have any idea where some of your older pensions are held. Well luckily the government has introduced a new pension tracing service which can be accessed online here.


The pros and cons if you consolidate pensions

Like most things in life there are pros and cons if do decide to consolidate pensions.


  • Keeps paperwork and administration simple by only having to deal with one company.
  • Newer modern style pensions can be much cheaper than older pensions.
  • Having more money in one pension may reduce the charges further.
  • You may find you have far more investment options with a new modern style pension.
  • Easier to manage your investment strategy and risk if you only have to focus on one pension.


  • Older style pensions may have special benefits that are no longer available with newer modern pensions.
  • It can take a while to contact all your pension providers and to arrange a transfer.
  • Your pension provider may charge you for transferring away.
  • There may be charges to pay for setting up the new pension.
  • The pension you want transfer to may not allow transfers in.


What to look out for if you want to consolidate pensions  

  1. Check whether there is a penalty to transfer. Sometimes this can be a significant percentage of your pension pot and it may be too disadvantageous to transfer. If there is a penalty check when it reduces or is scrapped altogether.
  2. When discussing a transfer with the existing pension provider make sure they are including all the various parts of your pension. Some older style pensions may have different parts to them which link to different periods of employment. Some employers close down pensions and start new ones over time.
  3. Check the annual charges you are currently paying on your existing pensions and compare them to your new pension. If they are cheaper it may be disadvantageous to transfer. However charges should not be the only factor.
  4. Ask your existing pension providers whether you are entitled to any special benefits. This could include things like a guaranteed investment return, a guaranteed level of income in retirement (sometimes called a guaranteed minimum pension or guaranteed annuity rate) or protected tax free cash (meaning you can withdraw more cash from your pension tax free than newer pensions). Transferring away could mean you lose these potentially valuable benefits.
  5. Check the range of investment opportunities you have with your existing pensions and ask your existing provider what support they offer to help determine an appropriate level of investment risk for you.



In a lot of cases it can be very beneficial to consolidate pensions into one ‘pot’ but there is quite a bit to think about and you shouldn’t just rush ahead and do it.

For those who do not have the time, inclination or skill to go through the above process you may find it very beneficial to get expert help. By using a Chartered Financial Planner that also creates a financial plan for you as well as reviewing your pensions you will find the value you get far outweighs any cost.


Risk warning:

Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.

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