Why combining your pensions can get you on the right road to retirement

Authored on
10 Apr 2024



A few weeks ago, a powerful retirement statistic came across my desk: women need to work for an extra 19 years to retire with the same pension savings as men. That means a girl would need to start saving at three years old to close the gender pensions gap.

But it doesn’t need to be that way. By taking control of pensions, you can figure out the pot you’ve already built up and how much more work you need to do to reach the level of income that will give you the retirement you want.

You might be pleasantly surprised how much you have built up, but in any case, knowledge can empower you to make the best choices for your future.

10 different pension pots?

Auto-enrolment means that most people will be automatically put into their company pension when they start work, broadly so long as they are aged between 22 and 66 and earn over £10,000 a year, and assuming they don’t opt out. It has done wonders for boosting the amount we’re all paying into our pensions but it has also brought complexity, it’s very easy to end up with more pots than you can easily keep track of.

The Government estimates the average person has 10 or 11 different jobs in a lifetime. So that means building up 10 different pension pots.

That’s a frightening thought: 10different pensions to keep track of, with 10different companies. This administration nightmare may be the catalyst into combining your past pensions into a single one.

Advantages of combining pensions

There are many advantages to combining pensions. 

It makes it much easier for you to manage your pensions. All your retirement savings will be in one place, so you will know how much money you have saved so far and can work out what income you could get in retirement. Once you have that information, that puts you in the driving seat to make better decisions about your future – for example whether you need to pay in more money now.

And the other good news is one pension plan means fewer statements and paperwork, and only one online log in to remember. This makes it much easier for you to find the right information.

Combining your pensions together could give you a much greater investment choice. When people are automatically enrolled into their new employer’s pension, their pension savings are invested in a standard ‘default investment fund’. And there they will stay unless the person decides to change that investment choice. Because this investment fund is designed to cover the needs of, potentially, thousands of people it can only ever offer a very cautious approach. It’s a one-size-fits-all approach!

But you may want to take a different approach to your investments; one more suited to what you are trying to achieve. Your workplace pensions may not offer many different investment choices. If you combine your pensions into a Self-invested personal pension (SIPP) this could open to you a wealth of new investment choices and options. Plus, the provider can give you the support and information to help you make the right choices for you.

Finally, different pension companies charge different amounts for managing and investing pensions. Combining your pensions may mean you can choose the right-priced plan and pay far less in charges over time.

Before combining your pensions you need to first find them 

The first step is to know where your pensions currently are. Do this by digging out paperwork and working out if there are any pensions missing by going through your old employments. Get in touch with old employers and ask for information. If this is difficult – or the firm no longer exists – then there’s a free pension tracing service from the Government to help.

Before rushing to combine pensions, you need to do a few checks.

Some older style of pension plans will apply a penalty if people move their money away before a set date. Or other pension plans offer valuable benefits that could be lost on transfer - for example, a guaranteed price if buying an annuity. So, it’s worth checking whether these apply to your pensions.

If your employer is currently paying into a pension, then they will probably stop if you move your pension. You don’t want that to happen. Your employer’s contributions are the most valuable way of you building up a pension. So, it’s probably best to leave any pensions where your employer is still paying in where they are.

Another type of pension to leave alone would be a defined benefit pension scheme. This can be extremely valuable. Most people will need to get regulated financial advice before even thinking about moving it.

Fancy some help combining pensions?

Let’s run through that again. The way to combine pensions is first find them all. Check there are no penalties, guarantees or current employer contributions. Then give the pension provider the details of the pensions, and they will combine them into one.

However, that can still be hard work.

Fortunately, some pension providers offer a free pension finder tool (AJ Bell is one!). You give them details about your old jobs and they do the detective work to track down your pension plans. They will then give you a report highlighting which pensions can be moved and which should be left where they are. Finally, the provider can combine the pensions into one.

Having a single combined pension could give you a massive headstart in meeting your retirement goals. It makes it easier for you to manage your pensions, and simpler for you to plan your retirement.

We don’t offer advice, so it’s important you understand the risks, if you’re unsure please consult a suitably qualified financial adviser. The value of your investments can go down as well as up and you may get back less than you originally invested. Pension rules apply.

These articles are for information purposes only and are not a personal recommendation.