If you have multiple pensions, you can leave them where they are, or combine them into one.
Whether consolidation is the right choice depends on your personal circumstances and retirement goals. Here’s a breakdown to help you decide.
Benefits of combining pensions
Simplified management: Keeping track of one or two pensions is much easier than juggling multiple pots with different providers.
Lower fees: Some pension providers charge high management fees, so consolidating into a lower-cost pension can save money over time.
Better investment options: Moving funds to a provider with stronger investment choices, such as responsible or tailored investments, may help your pension grow more effectively, or better match your preferences.
Improved visibility: Having all your retirement savings in one place makes it easier to see your total pension value and plan ahead.
Potential drawbacks of consolidating pensions
Exit fees: Some pension providers charge an exit fee when you transfer out, which could reduce the benefits of consolidating. These fees may be:
- A flat fee (a fixed amount)
- A percentage-based fee (calculated from the pension pot value)
Loss of guaranteed benefits: Some older pensions, particularly Defined Benefit (DB) schemes, offer guarantees or perks (such as annuity rates or bonuses) that may be lost if transferred.
Market risks during transfer: Your funds might be out of the market temporarily, meaning you could miss potential gains if investments rise in value during the process.
How do you decide?
There’s no universal answer—it depends entirely on your financial situation and retirement plans. Here are a few key considerations:
Managing fewer pensions is often easier and gives you a clearer picture of your retirement savings.
Having multiple pensions can provide flexibility, allowing you to access funds at different times based on your retirement needs.
If you are unsure, getting financial advice can be valuable to help weigh the pros and cons. A qualified financial adviser can assess whether consolidation aligns with your long-term goals.
