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Consolidating your pensions: the advantages

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AR011098 06/2018

There are many good reasons why you might want to collect all your pensions and savings together in one place:

  1. It’s much easier to manage one pension than half a dozen. Rather than have to check values with a number of pension providers or schemes, you only have to deal with one. And you only get one annual statement.

  2. You are more likely to take an interest in your pension if you see it as one larger amount of money rather than a collection of smaller pots. In Australia, where pension saving has been compulsory for the last 20-odd years, they reckon that once someone’s pension is equal to their annual salary, they take a lot more interest in it.

  3. You can control your pension more easily. Your current pension may limit your fund choices or, in the case of some trust-based pensions, the trustees may dictate the fund you must have. Transferring to a single pension allows you to cast off these shackles and take control. That doesn’t mean you have to pick your own investments if you don’t want to. Most modern pensions also offer ready-made funds, matched to your personal needs, for those who don’t want to choose from thousands of different funds.

  4. You could end up with a bigger pension pot. Older pensions generally have higher charges, so moving your pension to a modern one could reduce the cost of administration and fund management. A small reduction of 0.5% a year might not sound like a lot, but it could increase your eventual pension pot by 15% over your whole working life.  Charges also tend to reduce the bigger your pension pot becomes. See the Individual personal pension charges and Workplace pension charges for more information about charges.

  5. It’s easier to track and switch your investments. Modern pensions allow you to see where your pension fund is invested and how it is performing - online and in real-time. You can follow your progress and use tools to see if you are on the right track towards a comfortable retirement as well as switch funds and pay more money in.

When should you think twice about consolidation?

How do you go about transferring your pensions?

The first step is to pick a new pension provider. That means doing a bit of research to find out how much they charge, what their customer service is like and whether their pension product offers the sort of features you need, for example, wide fund choices, free fund switching and online access.

Once you have chosen a pension that you think meets your needs, call or contact the new provider online and ask them if they offer a service that helps you consolidate your pensions. Most pension providers will write to your existing pension providers on your behalf to get the necessary paperwork, meaning that all you have to do is sign some forms.   

Once you have returned the forms, the transfer can then go ahead. The length of time it takes to complete this process depends on how quickly your existing pension provider(s) issues the paperwork and then transfers your money. But the whole process usually takes anything from two to six weeks.

Charges for transferring your pension

Your new pension provider shouldn’t charge you for transferring your pension to them, but there will be ongoing charges to pay for administration and fund management costs.

Your existing pension provider may charge exit penalties if you leave them. This is one factor to consider before you transfer, because if the exit penalty is particularly large, you may be better off leaving your pension where it is. However, if you are over 55 and eligible to take your pension, exit penalties are capped at no more than 1% of your accumulated pension savings.


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