What to do with Multiple Pension Pots?

Pension specialist Simon Garber answers What to do with multiple pension pots

The average Brit will have 11 different jobs throughout their working life building up a series of smaller pension pots that often get left behind as we move from one job to the next. So what happens to them and what should we do with multiple pension pots?

It could be possible to consolidate multiple pension pots into one, but there may be benefits and risks of doing so. Whilst you could access a wider choice or investments you should check the costs of transfer and whether you have guaranteed benefits first.

Should I combine my pensions?

If you’ve got lots of small pension pots then you may want to consider combining them into one, which is known as Pension Consolidation. Some of the reasons you might want to consider this are:

  1. Convenience
  2. Improved Flexibility
  3. Greater Fund Choice
  4. Ability To Lower Cost Potentially Improve Returns
  5. Uncertainty, Take The Terminal Bonus While It Is Still Payable

And some drawbacks of moving your old pensions may include:

  1. Penalties To Transfer
  2. Cost Of Moving
  3. New Product May Be More Expensive
  4. Loss Of Guaranteed Benefits (Annuity Rates, Tax-free Cash, Life Insurance)
  5. Loss Of Loyalty Bonuses, Terminal Bonus

So what are the main reasons to consolidate your old pensions?

  1. Convenience

Quite simply, It’s easier to manage your pensions if they’re in one place. You could save on administration and paperwork.

Your pension provider should send you a statement every year with the current value of your pension and the forecast for what it will be worth at retirement. With multiple pension pots you might find yourself drowning in paperwork and unable to see the wood for the trees. If you combine your pensions you’ll be able to see at a glance how much money you have saved and whether you are on track to meet your retirement goals. It’s also going to be easier to see how much you’re paying in any associated fees.

Also, when it comes to accessing your pensions it may be easier to only have to deal with one pension provider.


2) Improved Flexibility

How we can access our pension has changed massively with the arrival of Pension Freedoms and some older pensions don’t offer the flexibility that newer pensions do. Most people with a Defined Contribution pension will opt to access their pension via  Flexible Drawdown, allowing them to flexibly access their money through retirement, but not all funds allow flexi-drawdown and it can be expensive to do so from others – view our pension income drawdown calculator.

By moving your pensions into a more flexible arrangement now, you can save yourself from having to deal with this later when you want to access your pension.

3) Greater Fund Choice

Along with The flexibility of how you access your money, there is also the flexibility of how you invest your money that you should consider.

The investment world is constantly changing and there are literally thousands of investment funds available. However, some older pensions may only offer you the option of a select few investment funds and you could be missing out if these are underperforming the market.

Competition is fierce in the investing world and you may also find that some of the newer investment funds offer lower costs than their older counterparts.

4) Ability to lower cost and improve returns

Whilst it might sound like an oxymoron to be able to lower costs and improve returns at the same time, with the huge range of newer investment fund available, it may be possible to do just that. A financial adviser should be able to benchmark the success of your current pension investments against what is available in the marketplace and identify any opportunities to lower your current investment costs and/or improve the performance of your investments.

High costs and low investment performance is a double whammy that can erode the value of your pension. Sometimes you can justify paying more in fees if you’re seeing the investment performance to back it up, but you should be aiming to maximise your investment return whilst minimising the amount you’re paying out in investment costs.

Some newer investment options can offer you the same investment options for a much lower fee than you have previously been paying.

5) Uncertainty

On some old policies they can be invested in “with profit” funds, sometimes it can be the only style of fund available. These old ‘with profit’ funds can with something known as a Terminal Bonus that can get paid out when you transfer or take your retirement benefits.  

It’s not uncommon for people to hold on to these types of investments because of the bonus that they pay but because of the complex rules surrounding these types of funds the bonus is not guaranteed – it can be lowered, raised and in bad market conditions, removed entirely.

If there’s a good argument for consolidating your pensions, you should consider the uncertainty of staying in these kinds of investments.

What Issues Should I Consider Before Deciding To Consolidate?

Don’t forget that there are some reasons you might want to keep your pensions where they are too. As with any Pension Transfer, there could be risks involved

  1. Penalties to transfer

Some Pension funds may have exit penalties attached to them. In the case of an underperforming fund or one with excessively high charges, it may be worth paying this penalty to transfer into a better performing investment, but make sure your sums add up.

2) Cost of moving

If you’re asking a Financial Adviser to move your pensions you could end up paying Financial Adviser fees and there may also be up-front product fees for the investments you are moving into.

Now, your financial adviser might be worth their weight in gold, and the investments you’re moving into may well justify any associated fees but it’s always worth checking and being sure of any associated costs before moving your pensions.

3) New product may be more expensive

Any savvy investor will know that more expensive fees are not necessarily always a bad thing. Sometimes, you really do get what you pay for. But, again, check that you’re happy with how much you’re going to be paying. Does the potential return or added flexibility justify the higher costs? Will the new product help you meet your goals in a way that the old product couldn’t?

4) Loss of guaranteed benefits

You should never move a pension without first checking that you don’t have any guaranteed benefits attached to it. Some pensions come with guaranteed Annuity rates or you may have tax-free cash attached to that pension. If you have valuable benefits attached to a pension, you may be better off to leave it where it is.

Why is a Guaranteed Annuity rate valuable?

In the old days of pensions, when you retired, you would opt for an annuity that would pay a guaranteed rate for the rest of your retirement. Post-pension freedoms fewer people are opting to buy an annuity policy, but if you don’t like the idea of investment risk or a fluctuating income in retirement then you might want to use at least some of your retirement pot to buy an annuity. A guaranteed annuity rate could ensure that you receive a better deal than is available on the market when you retire and is not something you want to give up unless you’re absolutely certain that you won’t use it.

In rare cases, you might find that a pension has additional life insurance attached to it, either way, it’s important to know exactly what you might be giving up before you make any decisions to move your pension.

5) Loss of loyalty bonuses/terminal bonus

Not all pensions come with loyalty bonuses or a terminal bonus but if yours do you might want to consider whether it is worth keeping hold of them. If you are close to retirement, for instance, it may make sense to keep hold of these pensions. Talk to a financial adviser who should be able to help you weigh up your decision.

N.B. If you’re considering moving a Final Salary Pension

A defined benefit or Final Salary pension is very different from a standard defined contribution pension. These ‘gold-plated’ pensions are extremely valuable and for the majority of people who have them, it is in their best interests to keep them where they are, as transferring would result in the loss of guaranteed benefits that cannot be replaced for their transfer value.

We’ve written an entire guide on Final Salary Pension Transfer to talk you through the specific risks and benefits of transfer.


If you’re considering consolidating your pensions, it’s important to weigh up the risks and benefits. Pensions and tax rules are complex, and the decision is normally irrevocable, so you can’t go back if you change your mind at a later date. To discuss your situation and ensure that you don’t lose any valuable benefits, please contact us.

Simon Garber, DIP PFS | Pension Transfer Specialist | Southampton

About the Author

Simon Garber DIP PFS is an Independent Financial Advisor and Qualified Pension Transfer Specialist. He is the Managing Director and Founder of 2020 Financial, based in Southampton, Hampshire. Simon specialises in Pensions and Retirement planning and is a later life planning specialist. He also holds qualifications in investment and life insurance and is a member of the Personal Finance Society and Chartered Insurance Institute.

Simon is passionate about providing the highest standards of customer care and transparency. 2020 Financial were awarded the Pension Gold Standard in 2019. You can find out more about Simon here.

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