Is it worth consolidating my pensions?

6 June 2012


I'm 54 and over the years have worked for several different employers. As a result, I have accumulated a number of occupational pensions with different providers, maybe seven in all. I want to know if I should consider combining them and what the benefits and disadvantages are.


On the face of it, consolidating such a large number of plans seems an obvious choice, and there are certainly several advantages.


For a start, administration of your plans would be much simpler. You would be able to see your whole pension portfolio in one place, you would only need to contact one provider to make any changes, and it would be easier to make top-ups or increase your regular savings.

You'd also be able to set an overall investment strategy to suit both your risk profile and your future objectives.

This is so much more difficult when you have to make judgements about a range of funds offered by individual providers. You would be able to personalise your pension even more if you consolidated it all into a self-invested pension, as you could choose from the full range of investments, including investment trusts and, if appropriate, individual shares.

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However, there are also disadvantages and potential pitfalls. Some older plans may include valuable benefits, which would be lost on transfer. These could include: guaranteed annuity rates far superior to current annuity rates; guaranteed returns; a more generous tax-free cash entitlement than the current maximum 25% of fund value; and a guaranteed minimum pension.


Individuals who contracted out of the state earnings-related pension scheme before 1988 have more generous inflation-linked increases.

Consolidating your plans could also incur charges such as exit penalties if funds are transferred early, and some with-profits policies impose ‘market value reductions' by clawing back some of the bonuses already added. So for each pension plan, check what you would lose if you moved it, and what costs, if any, you would incur. If you won't lose out much, then yes, get consolidating.