Multiple Pensions: A Guide to Consolidation

A job for life is no longer the default option. Moving between companies is easier than ever, and it’s not unusual to change careers, even more than once, over the course of a working life.

If you set up a new pension every time you move employers, it’s easy to build up half a dozen or more by the time you retire. It can be difficult to keep track of multiple pensions, particularly if you move home or if your former employer goes out of business.

Whether you are approaching retirement or just planning ahead, it may be time to think about a pension review to make sure your retirement plans are on track.

Types of Pension

You may have accumulated several types of pension over the years, for example:

  • Personal Pensions (which can include Stakeholders, Self-Invested Personal Pensions or Group Personal Pensions linked to an employer)
  • Occupational Money Purchase Pensions
  • Occupational Defined Benefit Schemes

Consolidating Personal Pensions and Occupational Money Purchase Pensions is normally a fairly simple exercise. However, care should be taken, as some schemes offer certain guarantees and benefits that would be lost on transfer.

If you have a defined benefit pension, this will need to be carefully reviewed to determine if transferring it is in your best interests. For most people, the guarantees far outweigh the benefits of consolidation. 

While reducing the number of pensions you hold can be beneficial, it’s important to consider each plan on its own merits to ensure that you are not disadvantaged.

Benefits of Consolidation

There are several reasons why consolidating your pensions could be the best option for you:


It may be possible to reduce charges. Older style plans can be more expensive as the cost of investing has become more competitive over the years. 

Investment Choice

Newer, platform-style arrangements can offer access to thousands of investment options. A pension set up thirty years ago might only offer a handful of funds, which may be closed to new business. Similarly, even more modern workplace schemes tend to have a limited ‘default’ investment choice. If you are consolidating multiple pensions into one larger fund, it’s important to diversify your investments. This is only possible with a reasonable selection of funds.


Pension Freedoms were introduced in 2015, meaning that pensioners have full flexibility over when and how to draw their pension income. It also means that pensions can be passed on to the next generation, either as a lump sum or in the form of beneficiary’s drawdown. Many older pensions don’t offer this level of flexibility. For example, an old Stakeholder plan may allow you to draw the fund in full as a lump sum, but would not permit you to phase your withdrawals over a number of years, or vary the proportions of tax-free cash and income taken. A more modern plan is often required to take full advantage of the new freedoms.


While it should never be the only reason to consolidate, holding all of your pension funds in one place can make your retirement far easier to manage. You can view all of your investments in a single valuation and can easily check how the funds are doing. A suitable portfolio can be created to match your goals and risk profile. It’s also simpler to withdraw income from a single source, and to monitor the position so that you don’t run out of money.

Potential Disadvantages

While consolidation has its advantages, there are a number of reasons why it could be beneficial to leave things as they are. For example:


Your existing pensions may have very low charges, particularly if the scheme is linked to an employer. It is always worth comparing the charges on a like for like basis, taking into account the cost of any advice. Higher charges do not necessarily rule out a consolidation, providing the new plan offers value for money and more suitable investment options.


Your existing plans might offer guaranteed annuity rates or bonuses. These are rarely available from newer contracts, and should be carefully examined. For some clients, it is inappropriate to give up any level of guarantee as they require a fixed income and cannot cope with a higher level of risk. In other cases, it may be determined that the growth potential of the new plan outweighs any guarantees lost. This can only be judged on an individual basis after analysing your circumstances.

Protected Benefits

Some older plans offer a tax-free lump sum higher than the current standard 25%. It is sometimes possible to preserve this, for example by winding up an old occupational scheme and moving the benefits to a Section 32 Buy-Out contract. Sometimes the requirement for flexibility is more important than tax-free cash, particularly if the benefit is marginal. 

If you are considering consolidating your pensions, and you are at all unsure about whether or not to proceed, we’d always urge you to consider taking professional advice. In most circumstances a decision to consolidate pensions is irreversible. 

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Joe Jackson

Helping people achieve their financial goals is an extremely rewarding experience. No two clients are the same, which means no two days are the same. It’s a really fast-paced industry, full of characters and personal interaction, and I absolutely love it.