Should I Combine My Pensions?

If you have changed jobs several times, there is a good chance you have built up more than one pension. You might have an old workplace pension from your first job, another from a previous employer and a current pension that you are paying into today.

Over time, having several pension pots can make it difficult to keep track of how much you have, where your money is invested and what you are paying in charges. This is why combining pensions can be worth considering.

Bringing suitable pensions together could make your retirement savings easier to manage, potentially reduce charges and give you access to a wider range of investment and retirement options. It can also give you a much clearer picture of your overall retirement position.

Why combine your pensions?

The biggest benefit of combining pensions is often simplicity.

If you have three, four or even more old workplace pensions, you could be dealing with several providers, different investment funds, separate statements and different charges. Bringing suitable pensions together could leave you with one main arrangement that is much easier to monitor.

It also gives you the opportunity to review what you already have rather than simply leaving old workplace pensions where they are because you have not got around to looking at them.

GOV.UK confirms that having pensions from more than one employer is one of the reasons people may choose to transfer and bring their pensions together.

For many people, a pension consolidation review is therefore less about moving money for the sake of it and more about asking whether the pensions they already have are still suitable.

Could combining pensions reduce your charges?

Charges are another reason to look at old pension arrangements.

Older pension schemes can sometimes have higher charges than newer arrangements. While a difference of a few tenths of a percentage point might not sound significant, charges are taken from your pension over many years and can therefore have a meaningful effect on your eventual retirement fund.

MoneyHelper explains that transferring a pension could potentially save money where the new arrangement has lower fees.

That does not mean the cheapest pension is automatically the best pension. Investment choice, flexibility, service and the features available should all be considered alongside cost.

However, if you have several old pensions, comparing the charges could highlight an opportunity to make your retirement savings more efficient.

Could you get better investment options?

Your pension is invested for potentially decades, so how your money is invested matters.

Some older workplace pensions have relatively limited investment options. A newer arrangement may offer a wider range of funds, allowing your investments to be structured around your objectives and attitude to investment risk.

Combining pensions can therefore provide an opportunity to review your overall investment strategy rather than having different pension pots invested in completely different ways without any real overall plan.

The aim is not simply to find a pension with more funds available. It is about making sure your investments are appropriate for your circumstances and your long term retirement objectives.

This is one of the areas where professional advice can add value. Rather than simply asking which pension has the lowest charge, a wider review can consider the pension, investments and your overall financial position together.

Five potential benefits of combining your pensions

For someone with several suitable defined contribution pensions, consolidation could offer several advantages.

1. Easier to manage

Having fewer pension providers can make it easier to keep track of your retirement savings.

2. Potentially lower charges

Reviewing your existing pensions could identify arrangements where you are paying more than necessary.

3. Greater investment choice

A new pension could provide access to a wider range of investment options.

4. A clearer retirement picture

Bringing suitable pensions together can make it easier to understand the total value of your retirement savings.

5. Greater flexibility

Some pension arrangements offer more options for accessing your money when you reach retirement.

The right outcome will depend on the pensions you already have, which is why consolidation should start with a review rather than simply transferring everything into one place.

What should you check before combining pensions?

Combining pensions can be a sensible step, but you should understand what you already have before transferring anything.

Some older pensions can contain valuable benefits or guarantees that may be lost if you move them. You should also check whether there are exit charges, whether your current employer is contributing to the pension and whether there are any special features attached to the existing arrangement.

Defined benefit pensions require particular care because they can provide a guaranteed retirement income. The FCA and The Pensions Regulator have specific rules around these types of transfers, and transferring out can mean giving up valuable guarantees.

The important point is that this does not mean you should avoid pension consolidation. It means you should review each pension individually and only combine those where doing so is appropriate.

That is exactly where a professional pension review can help.

Could your old pensions be working harder for you?

If you have accumulated pensions through several jobs, it is easy to forget about them.

You may have changed employer, started a new pension and simply left the previous one behind. The pension itself does not disappear, but that does not necessarily mean the arrangement is still the best fit for you.

A review could identify differences in charges, investment performance, fund selection and retirement options.

It could also give you a much clearer idea of how much you have already saved and whether your current pension contributions are likely to be enough for the retirement you want.

If you have several old pensions, you can arrange a free pension review with Castle Stonebridge to start understanding what you currently have and whether bringing your pensions together could be beneficial.

Castle Stonebridge Pension Advice

At Castle Stonebridge Financial Planning, we help clients understand their existing pensions and consider whether consolidation could make sense for them.

The process starts with understanding what you already have. We can look at your existing pension arrangements, charges, investments and available benefits before considering whether bringing some or all of them together could be appropriate.

The objective is not simply to give you one pension instead of several. It is to create a retirement arrangement that is easier to understand, appropriately invested and aligned with your longer term plans.

If you have any pension related queries, you can book a meeting with Castle Stonebridge to discuss your circumstances.

Where this leaves you

If you have several pension pots from previous jobs, there is a good chance they are worth reviewing.

Combining suitable pensions could make your finances considerably simpler while potentially reducing charges, improving investment choice and giving you a clearer picture of your retirement savings.

You do not necessarily need to keep every pension separate simply because that is where it has ended up. Equally, you should not transfer everything without first understanding what you already have.

The best starting point is a review.

If you have old workplace pensions that you have not looked at for several years, get in touch with Castle Stonebridge for a free pension review and find out whether bringing them together could make sense for you.

Disclaimer* The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.