Combining your pensions can make them easier to manage but it shouldn’t be done automatically. Look under the bonnet of each pension first, the type, the investments, the charges, the income options and any guarantees, and only then decide what stays and what moves.
If you’ve worked for a few different employers over the years, you’ve probably got more than one workplace pension. I’ve had clients come to me with sometimes 7 or 8 old pensions, all with different providers, investments and options at retirement.
In this guide I’ll walk you through what to consider if you’re thinking about whether to combine pensions, the benefits, what you could lose, and what to check before you make a decision. If you’re sat there thinking, “I’ve got pensions everywhere and I don’t know where to start,” this is for you.
Why do people end up with so many pensions?
Every time you join a new employer, you most likely get auto-enrolled into a brand new workplace pension with whichever provider your employer has set up its scheme with. It’s a good thing, as you’re being provided a pension, but it also means if you’ve had multiple jobs over the years, you will have a number of pension pots, each with their own provider, their own investments, charges, and an online login you’ve probably forgotten about. This is simply a natural side effect of how we work nowadays, as many people switch employers more frequently.
Leaving pensions scattered like this isn’t just untidy, it can come with some real downsides if not looked at. The first is simply losing track of them altogether. If you’ve moved house a few times, changed your name, or just lost the login details, that pension can become genuinely hard to find. There’s an estimated 3.3 million lost or unclaimed pension pots in the UK, worth a combined £31.1 billion, according to 2024 research. That’s an average of around £9,500 a pot.
If you have a vague memory of a pension, there is a free Government service called the Pension Tracing Service that can help you locate lost pensions.
What does combining pensions actually involve?
Combining pensions, sometimes called pension consolidation, means transferring your old pension pots into one pension. You choose a pension to move them into, and the money is transferred across from each of your old providers.
The case for bringing your pensions together is genuinely strong in a lot of situations. But it shouldn’t be done automatically. The goal is to look under the bonnet of each pension first, and only then decide what stays and what moves.
What are the benefits of combining pensions?
It’s easier to manage
It’s far easier to manage one pension than multiple. You get one place to check your fund, one set of charges to understand, and when you get closer to retirement, it’s much simpler to plan your income from one pot than to juggle separate withdrawal strategies.
Your money can be invested to suit your plans
Most old pensions are still sitting in whatever default fund you were placed into on day one and have never been reviewed since. Default funds are built for the average person, and they typically start to move where your pension is invested the closer you get to your retirement age, usually starting 10 to 20 years before that date. The most common shift is from equities, so stocks and shares, to assets like bonds and even cash. So depending on your set retirement age and the default strategy, that fund might not make sense for your actual plans. I’ve covered this in more detail in my post on workplace pension default funds.
Each pension provider will also have a different fund manager running the underlying default fund. Performance can vary quite a bit from one pension to the next, simply down to where that fund manager chooses to invest and how well they manage it over time. That’s why two pensions that look similar on paper can end up performing very differently.
You could pay less in charges
Every pension provider charges some sort of fee, but they’re not all structured the same way. When you’ve got five separate pots, you will be paying five separate sets of charges, some of which can be considerably higher than what’s available elsewhere. The important point is to make sure you are getting value for money from the charges you’re paying.
You can get more flexible retirement income options
Some, but not all, workplace pensions offer flexi-access drawdown. This means your pension stays invested while you draw an income from it flexibly. Most providers are a lot more limited. Some only let you take money out as one-off lump sums, some only let you access your tax-free cash, and some, particularly older ones, don’t offer drawdown at all, so your only option is to buy an annuity or transfer out. This might not matter much while you’re still building up your pension, but once you come to take money from it, it becomes really important.
Could I lose guarantees, protected benefits or favourable charges?
Yes, and this is an absolutely critical point. It’s particularly important if any of your pensions date back to before 2006, as that’s often when you find some of the most valuable perks.
- Guaranteed annuity rate (GAR). The pension promises you a fixed rate of income for life when you eventually convert it, regardless of what annuity rates are doing in the market at the time. A guaranteed rate from the 90s or early 2000s can sometimes be two or three times better than what you’d get on the open market today.
- Enhanced or protected tax-free cash. Instead of the standard 25% tax-free lump sum, your pension might let you take 30%, 40%, even more completely tax-free.
- Loyalty bonuses. Some providers give you a discount on your charges after you’ve held the pension for a certain number of years, or once your pot reaches a certain size.
- Exit penalties. Some older pensions, particularly with-profits style policies, can still apply an exit penalty if you transfer before a certain date, sometimes called a market value reduction.
- Lower charges. Some older pensions, or ones where your employer has negotiated a good deal, may simply be cheaper than what you’d move to. Compare the total charges on both before you transfer.
Guarantees and loyalty bonuses tend to get lost the moment you transfer the pension elsewhere, and providers don’t always make it obvious that you’ve got them. Sometimes it’s buried in old paperwork rather than flagged clearly online. So before you even think about moving an older pension, it’s worth checking specifically for these.
When does keeping pensions separate make more sense?
Combining isn’t always the right answer. Here are the situations where it can make sense to keep a pension where it is, or at least not move all of it.
The pension has a valuable guarantee
If a pension has a guaranteed annuity rate or protected tax-free cash, transferring it could mean giving that up. In some cases there are ways to use the benefit first, which you’ll see in Dave’s example below.
It’s a defined benefit pension
A defined benefit pension, sometimes called a final salary pension, gives you a guaranteed income for life. It doesn’t work the same way as a defined contribution pension, and how you assess it is completely different. If you have one, this requires separate advice due to the nature of its fixed income.
You’re still paying into it
If you’re still working for an employer and currently contributing to one of your pensions, be careful about transferring that one out in full. Doing so can close the pension down completely. If you do want to move money out of an active pension, ask your provider about a partial transfer. This means moving the bulk of your pot elsewhere, but deliberately leaving a small amount behind, sometimes just a hundred pounds or so, purely to keep the scheme open and your employer contributions going into it.
What information should I gather before making a decision?
Here are the steps I’d work through before you combine pensions.
- Track down every pension you’ve got, using the Pension Tracing Service if needed.
- Find out what type each pension is, defined contribution or defined benefit.
- Go through the investments, charges and income options on each one and assess these against your own retirement plans.
- Check whether there are any valuable guarantees or benefits attached to the pension, such as a guaranteed annuity rate or protected tax-free cash.
- Check whether there are any exit penalties or loyalty bonuses you’d lose by moving the pension elsewhere.
- Check whether you’re still paying into any of them.
- Once you’ve made your decision, update your beneficiary nominations on whatever you keep or move to.
That last step is easy to overlook. If you filled in a form fifteen years ago naming a beneficiary, someone you’ve chosen to receive your pension if you die, and your life has changed since then, that old nomination might still be sitting on file.
An example: should Dave combine his five pensions?
Let me give you an example of a recent client, Dave, who’s 58 and at the point of retiring. Over his career he’s worked for four different companies plus a couple of temp roles early on. When he sat down with me, he had five pensions over four providers, ranging from £200,000 to his smallest one worth less than £1,000 from a job he did for eighteen months in his twenties. He genuinely didn’t know that one existed until he found an old paper statement in the attic.
Dave had also been quoting me a transfer value on his fifth pension, assuming it worked just like his others. It actually turned out to be a defined benefit pension. Here’s what we found when we reviewed each one.
| Pension | What we found | What we did |
| Pension 1 (defined contribution) | Basic default fund shifting into bonds and cash, no flexi-access drawdown | Transferred into a new drawdown plan |
| Pension 2 (defined contribution) | Basic default fund shifting into bonds and cash, limited income options | Transferred into a new drawdown plan |
| Pension 3 (defined contribution) | Protected tax-free cash of 33.8%, but in a poorly performing fund | Took the protected tax-free cash first, then transferred the remainder into the new drawdown plan |
| Pension 4 (small pot, under £1,000) | From an eighteen-month job in his twenties, found on an old paper statement | Taken in full at retirement under the small pots rule |
| Pension 5 (defined benefit) | A guaranteed income for life, due to start paying out at 65 | Left exactly where it was |
So, five pensions became two, both doing a clear job, and nothing valuable was given away. If Dave had simply combined all five, he could have lost his 33.8% protected tax-free cash and given up a guaranteed income for life. You can read more about how I help with this on my pension consolidation advice page.
When should I speak to a financial adviser?
When it comes to having multiple pensions, the temptation is to just tidy them up and bring them together. But as we’ve seen with Dave, it takes working through each one properly, the type, the investments, the charges, the income options, any guarantees, and whether it’s even active, before you know what’s actually worth keeping and what’s worth combining.
If you’re not sure, a financial adviser will review each of these factors for you. But it’s also about having a financial plan that works for you, and a pension strategy that fits your retirement plans, rather than one that’s just left in the default scheme option. Retirement planning is particularly important in the run up to retirement, or if you’re already at retirement.
If you’d like to talk through your own pensions, I offer a free initial conversation with no obligation.
Frequently asked questions
Is it a good idea to combine pensions?
It can be, especially if your old pensions are in outdated, expensive or poorly performing funds. But it shouldn’t be done automatically. Check each pension for guarantees, exit penalties and what type of pension it is first.
Will I lose anything if I combine my pensions?
You could lose a guaranteed annuity rate, protected tax-free cash above 25%, or a loyalty bonus on your charges. Some older pensions can also apply an exit penalty if you transfer before a certain date.
Can I combine a defined benefit pension with my other pensions?
Some defined benefit pensions can be transferred to a defined contribution type. This requires separate advice as you are giving up guaranteed income from a pension.
What if one of my old pensions is very small?
If it’s worth £10,000 or less, you may be able to take it as a one-off lump sum under the small pots rule, without triggering the money purchase annual allowance.
How do I find an old pension I’ve lost track of?
Use the Pension Tracing Service, a free Government service that can help you locate lost pensions.
