Should you consolidate your pensions? Here are the pros and cons

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Should you consolidate your pensions? Here are the pros and cons

In today’s day and age, it is common to have multiple jobs in your lifetime. This could lead to you accumulating numerous workplace pensions from different employers.

According to MoneyAge, 28% of people have three or more pension pots. And, with so many, it could be challenging to keep track of them all and how well they are performing.

Losing track of your pension could affect your retirement plans as you would not have a full idea of what income you will receive from them. Even worse, losing a pension fund might mean you miss out on a valuable source of retirement income at all.

PensionsAge reports that £37 billion is currently in lost or dormant pension accounts, so imagine the boost to your retirement fund from finding a lost account.

To reduce the risk of losing a pension pot, consolidating all your pensions into one place could make it easier for you to manage and keep track of them. However, along with the many benefits of consolidating your pensions, there are drawbacks. Let’s look at the pros and cons of combining your pensions.

Consolidating your pension could save you time and money

Most of us dread wading through lots of paperwork, especially financial paperwork. So, one benefit of consolidating your pensions is that you’ll often have less admin if all your pensions are in one place.

This can be especially helpful if you move home as it reduces the chance of paperwork being lost or you forgetting to update your details with your numerous pension providers.

Having just one pension provider can mean making any changes to your investments and keeping track of your financial goals is easier.

Reducing your charges could also be a main benefit of consolidating pensions. That’s because having multiple accounts means associated charges for each of those individual pension accounts.

A report from interactive investor (ii) outlines that older pension schemes can have much higher percentage-based fees. These fees could be at 0.75% or more. Keeping your savings in these older schemes could mean missing out on substantial savings.

For instance, ii say that a saver with £150,000 in their pension and ongoing contributions of £200 a month could save £20,000 by changing to a modern pension with lower fees.

Increases the flexibility and control you have over your pension

Consolidating your pensions could give you a greater choice of investment options.

For example, some older pension schemes may just have a single “default” investment option. By consolidating your savings, you may be able to take advantage of a wider choice of investment options that are more aligned to your risk profile or to your ethics.

Some factors to consider before combining your pensions

While there are some benefits to consolidating your pensions, there are also some potential drawbacks to consider.

For example, some pension providers may have “exit fees” for transferring your pension to another provider. Usually, the payment will be a percentage of your pension savings.

And, if your pension resides in a “with profits” fund, your insurer may apply a “market value reduction” if you transfer your fund.

Either way, transferring your money may deplete the size of the pension pot you have from your previous provider.

Many older pensions also come with many attractive perks that you could lose if you transfer to another provider. These special features range from guaranteed annuity rates to being able to withdraw more than 25% tax-free cash.

Always establish if you will lose any valuable benefits before you decide to consolidate.

Get in touch

Please get in touch if you would like help or advice in deciding whether consolidating your pensions is the right step.

Email us at or call 0330 320 5048.

Please note

A pension is a long-term investment. The fund value may fluctuate and go down, which would impact the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Posted 13/10/2022

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