Should You Consolidate Your Pensions?

The pros and cons of combining multiple pension pots into one account, and when it makes sense.

Why Multiple Pensions Happen

Most people change jobs several times during their career. Each time, if you were auto-enrolled into a workplace pension, you've likely built up another pension pot. It's not unusual to have three, four, or even more separate pensions scattered across different providers.

The Benefits of Consolidating

Having all your pensions in one place makes life simpler. You only have one set of login details, one annual statement, and one place to check your progress. Consolidating can also reduce fees if some of your old pensions have high charges.

Reasons to Keep Pensions Separate

However, consolidation isn't always the right move. Some older pensions have valuable features you'd lose by transferring – such as guaranteed annuity rates, protected tax-free cash entitlements, or final salary benefits.

Exit Fees and Penalties

Check whether your old pensions have exit fees before transferring. Some older plans charge significant penalties for leaving early. These fees might exceed any savings you'd make from lower annual charges elsewhere.

Guaranteed Benefits

Some older personal pensions come with guarantees that are extremely valuable. For example, a guaranteed annuity rate might promise a much higher income than you could get on the open market today.

Where to Consolidate

If you decide to consolidate, you could transfer old pensions into your current workplace pension if it accepts transfers and has reasonable fees. Alternatively, set up a personal pension (SIPP) with a low-cost provider.

The Transfer Process

Pension transfers can take several weeks or even months. You'll need to contact your old pension providers for transfer-out forms. During the transfer, you'll be out of the market – your investments will be sold and held as cash until complete.

Lost Pensions

Before considering consolidation, make sure you've tracked down all your old pensions. The government's Pension Tracing Service holds contact details for over 200,000 schemes. It's worth checking – you might have pensions you've forgotten about.

Small Pension Pots

If you have several very small pensions (under £10,000 each), consolidation often makes sense. The fees on small pots can be disproportionately high as a percentage of the fund.

How We Can Help

At Harmond Capital, we help clients review their pension arrangements and decide whether consolidation is appropriate. We'll check for exit penalties and protected benefits, compare providers and fees, and handle the transfer process.