Should I combine my pensions?

Should I combine my pensions?

If you have a defined contribution pension, you have the option to transfer it to another pension provider and consolidate multiple pots in one place. 

This can bring several benefits:

• Less admin: bringing together several pensions in one place can make it easier to keep track of your savings
• Lower charges: over the long term, moving your savings to a cheaper scheme can significantly boost the value of your pension
• More control: if you have the time and confidence to make your own investment decisions, consolidating your savings in a self-invested personal pension (Sipp) will give you access to a wider choice of investments 

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What happens to my pensions if I change job?

Thanks to auto-enrolment, most people are signed up to a pension scheme whenever they start a new job. 

But when you move to a new employer, your pension won't automatically follow you.  

This means that over time you can build up multiple pension pots in different places, making it hard to keep track of them all.

• Find out more: how to find old pensions

Can combining pensions save money?

If you move to a scheme with lower charges, you can significantly boost the value of your pension over the long term. 

Charges on the default investment option in workplace pensions are now capped at 0.75%, but they can be higher on older schemes. 

As our example below shows, moving a £100,000 pot from a provider that charges 0.75% ('pot A') to one that charges 0.25% ('pot B') could leave you more than £17,000 better off after 20 years. 

How do I combine my pensions?

Once you’ve chosen a new pension provider, you'll need to complete its transfer application form - this will ask you to provide details of the pot(s) you want to move. It will then manage the transfer on your behalf. 

Your existing company must move your pension within six months of the start of the transfer process. The clock won’t start ticking until it has received all the correct documentation.

Before going ahead, make sure you check whether there are any benefits you would lose by transferring out of the scheme - or any exit charges you need to factor in.

There are two ways in which you can transfer your pension funds: either your old provider sells your investments and moves your money in cash, or the existing investments are moved across as they are (known as an ‘in-specie’ transfer).

Combining pensions into a Sipp

Money you save in a workplace pension will be invested in default funds designated by the scheme provider, so you don't need to proactively choose and monitor your investments. 

But if you're an experienced investor, opting for a self-invested personal pension will give you more control over your savings and access to a wider choice of investments. 

Sipp charges can also work out cheaper than workplace schemes.

• Find out more: Best Sipps 2025

Questions to ask before combining your pensions

There are several advantages to combining your pensions, but it won't be the right move for everyone. Make sure you check the following before you proceed:

How much am I paying in charges?

Moving your pensions can be a good way to reduce charges and ultimately boost the value of your pot. Start by checking the charges you’re currently paying: if you aren’t able find these figures from your annual statement or via an online portal, contact your scheme administrator or pension provider directly. 

Do I have a guaranteed annuity rate?

Some defined contribution pensions from the 1980s and 1990s had a guaranteed annuity rate (GAR), which will be higher – sometimes around double – than what’s available on the rest of the annuity market. 

If you have an older pension, check with your provider to see if it includes a GAR. If so, you’re likely to better off leaving your money where it is. 

Will I have to pay an exit penalty?

Some older pensions still apply exit charges. You will need to weigh up these charges against the potential savings you will make from moving to a lower cost scheme.

Am I at risk of being scammed?

A transfer can be paused if it's considered risky by your provider or trustees - for example, where overseas investments are included in the new pension. 

It will be stopped altogether if the risk of a scam is considered to be significant - for example, where an individual has been persuaded to make a transfer following a cold call or other unsolicited contact. Never transfer your pension to a company that you know little about. 

Am I giving up a guaranteed income?

If you have a defined benefit (also known as 'final salary') pension, it rarely makes sense to transfer to a different scheme - as we explain below. 

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Transferring a final salary pension

Unlike defined contribution pensions, final salary (or defined benefit) pensions give you a guaranteed income when you come to retire, which often rises with inflation each year.

That's why it is usually best to leave your money in a final salary pension rather than transfer it to a defined contribution scheme.

Not everyone can transfer. If you’re already receiving payments from a defined benefit scheme, you won’t be able to switch to a defined contribution scheme. 

The same applies to those in unfunded public sector DB pensions, such as those for the NHS, teachers, the armed forces, the civil service, police and fire service.

How much will I get if I transfer my final salary pension?

If you do decide to transfer your final salary pension, the amount you get is known as the 'cash equivalent transfer value', which is calculated by your final salary scheme.

This is basically the amount of money your pension scheme would need today to make sure it could cover the cost of the benefits you were guaranteed to receive in the future, were you not to cash them in.

Traditionally, transfer values have been calculated as a multiple of around 20 times the annual income due at retirement. For example, a final salary pension worth £10,000 a year would produce a lump sum of £200,000. 

Anyone considering transferring a final salary pension worth more than £30,000 must seek financial advice. Some schemes won’t accept transfers without advice whatever the value. 

A reputable adviser should:

• Consider what you need (or want) from your pension, based on your financial circumstances and goals.
• Consider how well your existing pension will provide for this.
• Consider which alternative arrangements are suitable for you - and if the benefits are enough to outweigh the cost of switching.
• Explain the potential risks and benefits of switching or staying put.
• Explain clearly what the advice will cost you and, if you switch, the fees you'll need to pay.