How to combine your pensions into one pot

Since automatic enrolment was introduced in 2012, meaning more people were contributing to a pension with their employer, lots more people will now have small pension pots with different companies. Pension savers throughout the UK have been forced to wait for a solution that means they can access all their pensions in one place – which would help with the admin side of pensions.

The government’s proposal for pensions dashboards, which will allow people to view details of all their pension plans in one place online, have been repeatedly delayed and now look like they won’t materialise fully before late 2026. Alternatives such as the government’s ‘pot for life’ proposal announced in Chancellor Jeremy Hunt’s 2023 Autumn Statement could also take years to build and will not do enough to tackle the problem of lost pension pots, which was estimated by the PPI to be worth almost £27 billion.

But savers don’t need to wait for the government to provide a solution. Instead, there are plenty of reasons why combining your pensions now with a single provider can be a good idea.

Why should I combine my pensions?

One of the most obvious benefits of combining your pensions is that a single retirement pot is much easier to track and manage than having various pensions with different providers, all with different log-ins. You could also benefit from lower costs and charges, increased income flexibility and more investment choice by switching provider.

Older pension schemes, for example, often charge more than modern pensions, while plenty of pensions offered by employers don’t give you a full range of options when you come to access your pension or restrict your investments to the firm’s in-house funds.

Before transferring any old pensions, you should check there aren’t any valuable benefits attached that you may lose or exit charges that will be applied. Your provider should be able to tell you if this is the case.

If you do decide to combine your pension pots with a single provider, assuming these are ‘defined contribution’ pensions – where you build up a pot of money that you can access from retirement age – the process should be relatively simple.

If you have a ‘defined benefit’ (also known as final salary) pension valued at £30,000 or more, you will need to take regulated financial advice before transferring. Where defined contribution savers build up a pot of money, defined benefit schemes provide an income for life from a set date, usually based on your salary and the number of years you have been a member of the scheme. Lots of providers will only accept a transfer from your defined benefit scheme where the financial adviser has recommended you do this.

Once you’ve made the decision to combine your pensions, you’ll just need to choose a company and get the details of the pension or pensions you want to transfer. Once you’ve given the relevant details to your new provider, they should do all the legwork for you.

To help make this process easier, AJ Bell has its pension finding service, which can be used to locate lost pension pots before combining them. You can use the ‘Pension Finder’ tool to track down forgotten pensions and transfer them into a self-invested personal pension (SIPP). The government’s Pension Tracing Service is also a useful tool for locating missing pensions.

Your final step will be to choose where to invest your pension. When doing this, make sure you are comfortable with the risks you are taking, have a diversified selection of investments and, crucially, keep your costs as low as possible.

There really is no need to wait for policymakers to play catch-up with your pension money and the sooner you’re able to combine your pensions, the better the outcome for your retirement fund in the longer term.