Combining Your Pensions - The Pros and Cons

Individuals are likely to change jobs many times throughout their careers, probably starting a pension with each new employer. As retirement draws closer it is quite common to have pensions scattered across numerous providers, which some people find difficult to keep track of and understand.

Combining Your Pensions - The Pros and Cons
James de Lisle Wells

James de Lisle Wells

Chartered Financial Planner

Should I combine all my pensions into one plan?

As financial planners, a question we are regularly asked is: ‘should I transfer all my pensions into one plan?'. As part of pension planning, outlined below are some of the potential advantages and pitfalls of ‘consolidating’ your pensions.

Advantages of Pension Consolidation

Many take comfort in being proactive and feeling their retirement plans are in order. A big advantage of consolidating pensions is having everything in one place. This should make it easier to review investments, make any changes and predict the amount of income a single plan would provide. 

One unified pension Investment strategy.
Each separate pension could be invested in different investment funds. When looked at as a whole, it is unlikely that all the funds will come together as a blended strategy aimed at an individual’s objectives. Ensuring investments are the right funds is important whether consolidating or not. It is usually possible to change investment funds within an existing pension without having to consolidate into one plan; however, the same fund(s) may not be available in each of the separate plans so one pension with access to hundreds of funds is usually preferable.  With us, it is possible to create one, holistic investment strategy tailored to individual needs.

It can be difficult to identify what the ongoing charges are when there are a number of pensions to consider. Often having a number of pensions means there are charges which are needlessly paid twice or more, depending on the number of plans. Some charges may be needlessly high. It is true to say that charges are deducted from plans, and so the smaller the amount is taken, the more is left in the plans, and for the pension member. 

Pension freedoms
In 2015, numerous pension legislation changes were introduced, including the ability to withdraw as much or as little out of a pension as required, past the age of 55. The ability to draw down directly from the “pension pot” should be considered cautiously. It is not in everyone’s interests to do so. Nevertheless, it is important that the pensions a member has, have the ability to utilise all of the functionality the legislation allows. 

Pitfalls of Pension Consolidation

Some pensions should never be transferred. 
We have covered some of the risks associated with transferring final salary style pensions in previous articles (here & here) but the fact that transferring some pensions would mean extremely valuable income guarantees are lost, in most cases far outweighs any of the possible benefits outlined above. 

Final salary style pensions aside, some (typically) older pensions provide excellent benefits such as generous ‘guaranteed annuity rates’ and a ‘protected tax-free cash’ entitlement which is greater than the 25% usually allowed to be taken from a plan. If transferring such plans would mean any valuable guarantees are lost, then this is unlikely to be the best course of action.

With Profits plans are old style pensions which may, or may not be suitable to transfer. The concept of a With Profits plan is to give the member market-related returns with no downside risk. Good plans are excellent, and should not be touched, but there are many which aren’t so good. It is usually beyond investors to sort out the good from the bad, so advice is essential.

Exit fees
Penalties can be applied to some pensions if transferred away.

Transferring a from one or more pensions will incur consolidation/implementation costs. It is very important for pension members to be clear that the benefits of a transfer, outweigh all of the costs.

Care should be taken with any pension transfer. After all, pension pots inevitably represent a lifetime of hard-earned saving. Wrong decisions can be catastrophic. To that end, it’s worth revisiting an article we produced about how to spot a pension scam as a reminder of some of the dangers they can imply. 


This article covers only a few of the pro’s and con’s to consider before consolidating pensions. As always, the correct course of action is determined by an individual’s personal circumstances. Reviewing all ones’ pensions to gain a clearer understanding of the terms and conditions, charges and investments will help decide whether consolidation is a good idea.

If you would like to review your pensions and retirement plans, then click here to request a call back from an adviser or please contact us for an initial discussion.

This article is distributed for information purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily Ermin Fosse and does not represent a recommendation of any particular security, strategy or investment product. The information contained herein has been obtained from sources believed to be reliable but is not guaranteed. It is not a promotion of Ermin Fosse’s services.

Please contact us before you invest/disinvest. The past is not indicative of future results. When you invest you may not get back what you put in. Errors and omissions excepted.

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