Under UK law, employers must provide a workplace pension and automatically enrol eligible workers. Because of Auto-Enrolment, many people end up with several pensions spread across different providers over time. This is where pension consolidation can help make planning for retirement easier.
What is pension consolidation?
Consolidating your pensions involves combining some or all of your pensions into one pension pot. Consolidating pensions into a single plan could help you:
- reduce the stress of managing multiple pots;
- give you greater transparency into their performance; and
- potentially save you money on fees.
That said, there are also a few important considerations to make before deciding whether or not to combine your pensions, which we’ll explore below.
Benefits of consolidating your pensions
Greater visibility over your retirement savings
Combining pension pots can give a clearer view of your total retirement savings and how they’re performing. Keeping all your funds in one place helps you understand your current position and what steps might be needed to meet your retirement goals. This clearer picture can make planning your finances easier and less time-consuming.
Potential savings on fees
Holding multiple pensions often results in paying management fees to several providers. By consolidating, it may be possible to reduce the total charges, as some providers offer lower fees for larger pots. With PensionBee, you’ll pay between 0.50% and 0.95% depending on the plan you choose, and we’ll halve the pension fee on the portion of your savings over £100,000. Over the long term, paying fewer or lower fees can make a noticeable difference to the final size of your pension fund.
Simplified administration
Managing multiple pension accounts usually involves receiving pension statements and other documents from each provider. Consolidation can reduce the paperwork and the risk of losing track of pension pots, making it easier to manage your retirement planning. With one pension, managing your savings can become much simpler.
Consistent investment approach
When pension savings are spread across different schemes and providers, investment strategies may be inconsistent. Consolidation can help you align your investment strategy to match your preferred levels of risk and retirement timeline. This can help ensure that pension savings are invested in a way that suits your personal circumstances and goals.
More flexible access to your money
Before 2015, ‘pension drawdown‘ (withdrawals) existed but was limited to a capped amount, known as ‘capped drawdown’. Some people who met specific eligibility criteria could take a higher amount under what was called ‘flexible drawdown’.
In 2015, pension rules changed to introduce ‘flexi-access drawdown’. This replaced flexible drawdown and extended the ability to withdraw as much as you want from your pension for everyone. While capped drawdown still exists, it only applies for those who had arrangements in place before 2015.
This legislative change gave retirees much greater control over how much money they could take from their pension, rather than limiting them to fixed amounts.
Before, retirees could only buy an ‘annuity‘ (a financial product where you pay money to an insurance company, and in return, they pay you back regular amounts of money over time). Now, you can take money out of your pension as you need it, called ‘income drawdown‘, while keeping the rest invested.
Easier to leave a clear inheritance
Having all your pension savings in one place can make it simpler to manage and designate your beneficiaries. Understanding the type of death benefit payment options your new provider offers is important when considering how your loved ones will be able to use your funds.
This clarity ensures that your chosen heirs receive your pension benefits as you intend, without complications from multiple providers or conflicting instructions. Consolidation can help provide peace of mind that your retirement savings will be passed on smoothly and according to your wishes.
Be aware that pensions will be within the scope of Inheritance Tax (IHT) from April 2027, which may impact your estate planning decisions.
What to consider before consolidating pensions
Be aware of pension scams
Pension savings can be a target for scammers. Be cautious if approached with offers to transfer or access your pension before the age of 55 (rising to 57 from 2028), as this is often a sign of a scam. Scams can result in losing some or all of your pension, as well as facing significant tax penalties. If in any doubt, contact Action Fraud or seek advice from a trusted source. You can also read the FCA’s pension scams leaflet to learn more.
Check for exit fees
Some providers, particularly those with older pension schemes, may charge an exit fee if you transfer out. These fees can either be a fixed amount or a percentage of your pension pot’s value. It’s important to weigh the cost of any exit fees against the potential savings on future charges and the benefits of consolidation.
Understand your pension type
Defined benefit pensions (often known as ‘final salary’ pensions) promise a guaranteed income in retirement based on salary and length of service. These are different from defined contribution pensions, which are based on the amount paid in and any investment returns.
Transferring out of a defined benefit scheme is a significant decision, as valuable guarantees may be lost. For defined benefit pensions worth over £30,000, it’s a legal requirement to take advice from a qualified Independent Financial Adviser (IFA). Some public sector pensions can’t be transferred at all.
Consider any special or safeguarded benefits
Some pensions include valuable features such as guaranteed annuity rates (GAR) or protected tax-free cash. These are known as safeguarded benefits and may be lost if a pension is transferred. If you have safeguarded benefits worth over £30,000, taking regulated financial advice is required by law.
How to consolidate your pensions
To consolidate your pensions you’ll need to provide information to your new provider. This can include details like the provider name or a policy number. You can usually find this information through any old paperwork you may have, or by speaking to the provider directly.
If you want to combine your pensions into a PensionBee plan, the more information you can give us about your providers the faster we can find and transfer your money. If you don’t have this information to hand though, don’t worry, as you can always add it later in your ‘BeeHive’ (your PensionBee customer account).
You can also tell us about the pension you have with your current employer. However, we won’t be able to transfer it until after you’ve changed jobs and received your final employer contributions to ensure you don’t lose out.
How long does it take to consolidate my pensions?
On average it can take 12 weeks to complete your pension transfer. However, transfer times vary between providers and depend on how much information your new provider has about your old pensions.
It also depends on the method of transfer used by your old providers. Whilst some providers use fast and secure electronic methods, others still use a manual process of sending paperwork through the post which can slow the process down.
Also, all pension providers have to complete due diligence checks when handling transfers, but how they do this can vary quite a bit from one provider to another.
Getting further help
For those unsure about the best course of action, Pension Wise (a service from MoneyHelper) offers free, impartial guidance appointments for people aged 50 and over. These sessions can provide information about different pension options and help with retirement planning.
For those under 50, MoneyHelper’s website contains a range of useful information on pensions and personal finance. Consolidating pensions can offer a number of benefits, but it’s important to understand the details of each transfer and seek guidance if needed.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
Last edited: 01-08-2025
