How to consolidate and combine pensions

If you have more than one pension, combining these into one can make looking after your retirement money simpler and it may cut your costs too

Thanks to auto-enrolment, most people working now are automatically signed up to a new pension whenever they move jobs. These don’t follow you if you then change jobs so you could have several small pots to look after.

Consolidating smaller pots into one means you’ll only need to check one pot – cutting down the amount of time you need to spend on pension admin. But there are lots of things to consider – including fees and charges – and not all pensions can be combined.

Here we discuss everything you need to know about combining pension pots.

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What is pension consolidation?

If you have several small pension pots, from previous jobs or private pensions you may have set up, you may be able to combine them into one pot.

This means instead of checking each individual pension, you just need to look in one place as all of the money in each pot will be moved into one.

Having just one pension can also cut your costs in some situations, if it’s cheaper to pay just one provider to manage your money rather than multiple companies. You could also save significant amounts on fees – if your old pension is more expensive to run than the new one you are combining pots into.

Can you combine all of your pensions?

Not all pensions can be combined into one so you’ll need to check what type of pensions you already have first.

If you have a defined benefit (often shortened to “DB”) pension the amount of money in your retirement pot will be dependent on how much you earn and also how long you’ve worked at a company. They pay out a guaranteed income when you retire until you die, and are usually linked to inflation.

These pensions, also known as ‘final salary pensions’ are not very common any more and if you have one worth £30,000 or more you’ll need to get financial advice before you can consolidate it.

Defined contribution (often shortened to “DC”) pensions are much more common and these can be workplace pensions, set up automatically by your employer, or private pensions you may have set up – such as self-invested personal pensions (SIPPs).

These pensions are built over time with you (and your employer if you have one) making contributions each month and you can usually consolidate these pots together, if you feel it’s the right decision.

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Why would I combine my pensions?

Combining your pension pots can be done to:

• Lower your fees if you feel you’re currently paying too much in charges
• Combine all your pension pots into one place
• Put you more in control of your investments
• Give you more flexibility, if your current pension has restrictions over when you can access the money or where it can be invested 

However, it’s not always the best choice. Reasons to keep pensions where they are include if:

• You’re happy with where your money is invested and any fees you’re paying to your pension provider
• There are benefits attached to your pension that you don’t want to lose
• Exit fees for closing a pension are too high
• Your employer is currently paying into the pension

If you’re unsure if consolidating your pensions is the best decision for you, there’s free help and advice available from Pension Wise. 

How to consolidate pensions

Consolidating pension pots simply means you are merging all of your pots into one, so you’ll just have one pension to monitor and review. But before you start this process, it’s important to decide if it’s right for you and your money.

Here’s how to do it and what to consider.

1. Gather all the information you need 

When you consolidate your pensions, the company you’ve chosen to be your main pension provider will usually do most of the admin for you, but it will usually need the following details from you first:

• Current valuations of your pension pots, if you have a defined benefit pension this is known as the Cash Equivalent Transfer Value (CETV)
• Details of your pension providers including policy numbers and names of providers (we explain how to find lost pensions in our guide)
• Evidence you’ve taken financial advice for defined benefit pensions 

You’ll also need to check your existing pensions to make sure you’re allowed to consolidate them, review any benefits you’re currently getting, your investment choices, and also look at the fees and charges you’re paying compared to the cost of combining all of your pots into one.

2. Choose one pension pot

When you consolidate your pensions, you will need to choose one pension to move your money into, or you can also start a new pension. 

The pension you choose to be your main pension needs to accept transfers into it.

If you’re thinking about opening a new pension for this, check our best self-invested personal pensions (SIPPs) round up first.

Some pension providers offer to help you combine all your old pensions for you when you open one with them. This can be worth doing to give you a push to get the job done, especially if the new provider is cheaper then your old ones.

3. Transfer your pensions into one

When you transfer your pensions, you will usually need to tell your existing providers or the provider you’ve chosen as your main pension may do this for you.

You can usually complete this process online or through an app but if there are complications you may need to contact your providers by phone or email.

If your pensions can be transferred, and the main pension you’ve chosen accepts transfers, the process should begin and all of your money will start to be moved into one pot.

Older pensions will then be closed (either by you or your providers) and you should see all of your retirement money in one place.

4. Watch out for scams

Criminals are constantly trying to find new ways to scam people out of their money and this is especially true when it comes to pensions. If you’re contacted about your pension, especially someone promising to give you a better return or earlier access to your money, this should be a red flag that it is a pension scam.

If you’re unsure you can verify a company on the Financial Conduct Authority (FCA)s firm checker.

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Is it better to consolidate pensions?

Consolidating your pensions can have many benefits but it won’t be right for everyone.  

Pros to consolidating pensions

• Easier to manage one pension instead of multiple pots
• Lower fees to just pay one provider for managing your pension
• More flexibility if previous pensions had limits on withdrawals
• Greater control of your investments

Cons to consolidating pensions

• Fees aren’t always cheaper – and you may be charged for closing an older pension
• You could lose out on benefits attached to a previous pension
• If you have a defined benefit pension you may need to seek financial advice first
• Not all pensions will allow transfers in or out

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