Home Insights & AdviceCombining multiple pensions into one pot: Three considerations to make

Combining multiple pensions into one pot: Three considerations to make

by Sarah Dunsby
30th Sep 25 2:36 pm

Weโ€™re a nation that loves saving for retirement, and with around 9 in 10 eligible employees saving into workplace pensions, itโ€™s clear that building a nest egg for the future is at the top of our priority lists. However, what happens when you decide that itโ€™s time to consolidate multiple pensions into one pot?

With 89% of employees in Great Britain saving into workplace pensions last year, there are now 21.7 million workers building their pensions. This represents an increase of 0.8 million among those saving and a 1% increase in the pension participation rate compared to 2023.

Many people can accumulate different pension pots as they move from job to job throughout their lives, and transferring these different pensions into one single pot to manage can help to reduce costs and fees, as well as providing a clearer view of their overall retirement savings.

This process of consolidation makes it far easier to monitor performance and plan for the future as a result. However, there are many considerations to keep in mind when transferring multiple pensions, and factors like cost implications, benefits, and hidden charges can all conspire to bite unwitting pension savers when they least expect it.

Because you canโ€™t reverse your consolidated pensions, you should never transfer different pensions into one pot until youโ€™ve taken the time to consider your options.

With this in mind, letโ€™s take a deeper look at three considerations to make when combining multiple pensions:ย 

1. Benefits donโ€™t carry over

When you transfer pensions, you can take advantage of new benefits that come from the provider that youโ€™re transferring to, but you may want to think twice about your actions if your old pension benefits outweigh those of your new one.

For instance, if you have a defined benefit (final salary) pension, you may not be able toย  move it into a defined contribution or โ€˜money purchaseโ€™ plan because you could lose the desirable existing benefits. Many providers will not allow a transfer like this, as it may not be in your best interest.

Always check the terms of your old pensions. You may be entitled to additional benefits like a larger lump sum or higher guaranteed annuity rates that youโ€™ll lose by transferring over.

Other benefits, like a protected pension age that allows you to access your money from an earlier age or death-in-service cover, can also be advantageous to you and your loved ones and may be worth keeping hold of.

2. Keep on top of your charges

Each of your pensions comes with its own set of charges, and you should always compare the fees of your old pensions against those of the new consolidated plan that youโ€™re considering to ensure that youโ€™re better off in the long run.ย 

Considerations like management fees can significantly impact the performance of your retirement fund when consolidating your pension. Looking to see how you would fare financially both with and without your consolidated pot will help to shed some light on whether itโ€™s worth transferring.ย 

You should also keep transfer fees in mind. Some providers, particularly with older pension schemes, could charge exit penalties for moving your funds out to another pot. This could represent a fixed fee or a percentage of your potโ€™s value. You should always read the terms of your pension before transferring funds to ensure that your decision is economically sound.ย 

You should also keep your Money Purchase Annual Allowance (MPAA) in mind. This enables you to cash in up to three small pension pots worth under ยฃ10,000 without triggering your allowance. If your pots reach more than ยฃ10,000, it will reduce your annual pension contribution limit from ยฃ60,000 to ยฃ10,000.ย 

3. What are the perks of your new plan?

The single biggest advantage of combining multiple pension plans into one pot is that you can gain greater control over how your retirement savings align with your financial goals. But what are the perks of the plan youโ€™re choosing? And are they right for you?ย 

Not all pension savers have the same priorities, so consider factors like accessibility through online portals, the freedom of flexibility when it comes to your retirement withdrawal options, ease of administrative tasks, and choice of investments when it comes to looking at your plans.ย 

Because some older pensions are more limited in the funds youโ€™re saving in, consolidating to a more modern plan can help you take advantage of alternative investment strategies. You may also want to consider switching to a self-invested personal pension (SIPP), which offers a greater choice of investments and more control overall.ย 

Time to consolidate?ย 

Thereโ€™s no single right or wrong answer when it comes to considering whether to consolidate your pensions into one pot.ย 

Take a look at your own personal financial goals, and explore the implications of transferring your existing pensions in terms of lost benefits and cost implications.ย 

Your retirement savings are one of the biggest investments youโ€™ll ever make, so getting it right for your needs is imperative. If youโ€™re unsure about your next steps, it may be worth contacting a financial adviser to help you align your pension strategy with your saving goals.ย 

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