How combining pensions works in the UK

If you’ve worked in multiple roles over the years, chances are you’ve collected several pension pots. Combining pensions into a single plan could make it clearer what you have saved for retirement. In some cases, people transfer pensions with the aim of reducing fees. Discover how pension consolidation can work and what to consider.

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

If you’ve had several jobs over the years, you might have built up multiple pension pots with different pension providers. Combining these into a single pension plan may help you gain better visibility over your future retirement savings. This process is known as pension consolidation, which involves transferring funds from workplace pensions, personal pensions, or self-invested personal pensions (SIPPs) into one place. Some people do so with the goal of reducing duplicated fees and cutting down on time spent managing different accounts. Before looking at how to merge pensions, it can help to understand which types of pensions can be combined.

There are two main pension types: defined contribution or defined benefit. Each is structured differently, which could affect how and whether they can be consolidated. Many of these pensions are part of a workplace pension, which can include employer contributions and automatic enrolment.

Defined contribution (DC) pensions (sometimes known as Money Purchase pensions) are typically built from the contributions you and your employer make (as well as any investment returns). That means when you combine DC pension pots, you add together their cash values. It may be possible to move multiple DC pension pots into a self-invested personal pension (SIPP), but it’s important to check charges before you transfer.

Combining defined benefit (DB) pensions is often more complex due to the nature of the pension’s benefits. Also known as Final Salary schemes, these pensions are calculated from your salary and how long you worked for an employer. The features of a DB pension are designed to provide a more predictable income for life in retirement.  Transferring them to other pension types often involves calculating the cash equivalent value.

If the transfer value is above £30,000, regulated financial advice is required before moving it. This is because transferring could reduce or remove some of these benefits, and is a high risk and irreversible process.

Transferring pensions to a defined contribution scheme could mean that future retirement payouts change, as DC schemes depend on investment performance rather than a guaranteed income. Always consider regulated advice before deciding whether a transfer suits your situation.

It depends on individual circumstances. Managing multiple pension pots separately can be time-consuming. Some people put their pension savings into one place to:

• Reduce their number of logins, documents, and statements, helping to stay more focused on long-term goals.
• See their overall retirement plan at a glance.
• Potentially access wider fund options such as global equities, ETFs, or multi-asset portfolios - typically through certain self-invested personal pensions (SIPPs).
• Save on fees – depending on the provider, combining pensions may reduce duplicated charges.
• Simplify estate planning – having one pot may make it easier for family members or executors to manage pension savings.

It’s important to note that benefits depend on the terms of the scheme and associated costs, and may vary depending on your personal circumstances.

While consolidating pensions can provide more flexibility and control it’s worth considering whether you could lose guaranteed benefits tied to your existing scheme. Some older pensions include features that aren’t usually available in modern plans, such as guaranteed annuity rates, inflation-linked protection, or the option to take a larger tax-free lump sum. Moving funds could mean losing these features permanently.

There might also be exit fees when transferring pensions, which could reduce the size of your pension pot. In addition, there could be tax implications if benefits are accessed sooner or in different ways than originally planned. If your current arrangement includes features that are difficult or costly to replicate, you may want to speak with a regulated financial adviser before making any changes.

This depends on whether your current pension scheme will allow a transfer, and whether you might lose any benefits in doing so. If you have taken regulated advice on your particular situation and decided it is the right choice for you, the steps for how to combine pensions are generally as follows. Please note that the following steps are for illustrative purposes only and are not intended as guidance.

Each pension pot typically includes details such as provider name, policy number, current value, and scheme type. Some defined benefit schemes may also include special features like guaranteed annuity rates or contribution limits. For some pensions, such as overseas pensions or those with a particularly high value, regulated financial advice may be recommended (for example, to check if an overseas pension scheme is recognised by HMRC and reduce the risk of scams.)

The UK government’s Pension Tracing Service can help find workplace pensions you might have forgotten about. There are an estimated 3.3 million lost pots across the UK worth nearly £31.1bn*. Finding old pension plans might lead to more funds.

Pension pots can be combined in different ways: through an existing provider, by transferring to a new provider, or setting up a self-invested personal pension (SIPP). Each option varies in terms of fees and how much control and choice the person has over their pension investments. 

Pension transfers usually involve submitting forms through the chosen provider. Processing times vary depending on scheme type, provider, and whether any special features need review. Many transfers can be completed electronically, especially with modern providers. However, older schemes might have time constraints.

Where benefits are complex or the amounts involved are higher, you may wish to consult a regulated financial adviser. For information on scheme rules and protections, as well as guidance on transferring pensions safely, you can consult The Pensions Regulator.

Transferring a pension from abroad into the UK typically depends on the pension scheme and the country it’s held in. Some transfers might trigger tax charges if the scheme isn’t recognised in the UK, which means your pension pot could be reduced in the process. You may want to speak to a regulated financial adviser before making any financial decisions.

Some digital tools support the process of combining pensions by helping you track down older plans or compare different options. For example, the UK government’s Pension Tracing Service can help with locating previous workplace pensions using basic employer or provider information. This may be helpful if documents are missing or details have been forgotten.

There are several digital platforms that allow consolidated oversight of your pensions. These services offer features like fee comparisons, investment choice through SIPPs, and simplified pension transfer processes. Choosing a platform that aligns with your financial goals can help with planning.

If your pension arrangements are complex, speaking to a regulated financial adviser could help assess what works best for your circumstances.

Raisin UK doesn’t offer pensions (and savings accounts serve a different purpose to pensions), but it can still support long-term planning. With a single Raisin UK Account, you can explore savings accounts with competitive interest rates from more than 40 different banks and building societies. All our partner banks offer protection for eligible funds under the FSCS scheme, which covers deposits of up to £120,000 per person, per bank. Simply sign up for a free Raisin UK Account, open a savings account, and transfer your chosen amount.

*https://www.pensionspolicyinstitute.org.uk/research-library/research-reports/2024/briefing-note-138-lost-pensions-2024/