How to combine your different pension pots

Lots of people will have multiple pensions from different employers, and it’s tricky to keep track of them all. But by taking charge of your pensions, you can evaluate your current savings and have your whole pot in one place to more easily manage. You might be pleasantly surprised by your existing savings, but regardless, being informed empowers you to make the best decisions for your future.

Due to auto-enrolment, most employees are automatically enrolled in their company pension plans, provided they are aged between 22 and 66 and earn over £10,000 a year, unless they opt out. While this has increased pension contributions, it has also added complexity. It's easy to end up with numerous pension pots.

The government previously estimated the average person has 10 to 11 different jobs over their lifetime, potentially resulting in the same number of pension pots. Keeping track of 10 different pensions with 10 different companies can be overwhelming, which is why combining your pensions might be a practical solution.

Benefits of Combining Pensions

1. Easier to manage: Having all your retirement savings in one place makes it easier to monitor your total savings and estimate your retirement income. This knowledge helps you make informed decisions, such as whether to increase your contributions.

2. Reduced paperwork: One pension plan means fewer statements, less paperwork, and only one online login to remember, making it simpler to find the information you need.

3. Greater investment choice: Workplace pensions often invest your savings in a standard ‘default investment fund’, which is designed to be a cautious, one-size-fits-all solution. Combining your pensions into a Self-Invested Personal Pension (SIPP) can provide more investment options tailored to your goals.

4. Lower charges: Different pension companies charge varying fees for managing and investing your pensions. Combining your pensions allows you to choose a cost-effective plan, potentially reducing fees over time.

Read more about how charges can make a big impact in this article.

Steps to Combine Your Pensions

Lots of people might have had ‘combining their pensions’ on their to-do list for a long time but keep putting it off. It can feel like a hassle to find the paperwork and get your pensions in order, but it only takes a few steps.

1. Find your pensions: Start by finding your existing pensions. Look at the paperwork and contact the provider to find out what’s in your pot and how to transfer it. If you don’t have the relevant paperwork, contact former employers for information. If this proves challenging, the government offers a free pension tracing service to help you track down old pots.

2. Check for penalties and benefits: Before combining pensions, make sure there are no penalties or valuable benefits tied to your current plans. Some pensions may have early transfer penalties or offer benefits like guaranteed annuity rates. Also, if your employer is contributing to a pension, moving it might stop these contributions. Employer contributions are crucial for building your pension, so consider leaving these pensions as they are.

3. Is it a defined benefit scheme? Defined benefit pensions can be extremely valuable. Transferring them often requires regulated financial advice. Most people should avoid moving these pensions without professional advice.

If this sounds daunting, some pension providers offer free pension finder tools such as AJ Bell’s pension finding service. These tools help track down your pensions based on your job history, provide a report on which pensionson which pensions can be moved, and handle the consolidation process for you.