Multiple Pensions? Check These Before Consolidating
If you’ve changed jobs several times, you’ve probably got old pension pots scattered across different providers without realising it. The good news is that bringing them together could make your retirement savings easier to manage and potentially save you thousands. But there’s a crucial catch: not all pensions should be moved.
Every time you change employer, you typically leave a pension behind and start a new one with your next company. Over a working lifetime, this adds up fast. You might have one pot from your first job, another from a company you stayed with for years, and maybe others you barely remember. Before you know it, your retirement savings are spread across several providers, each with different charges, investments and paperwork.
Why consolidation can help
Combining pensions won’t increase what you’ve saved – four pots of £25,000 will still equal £100,000 when merged. But consolidation can make a real difference through lower charges. If your new pension has lower annual fees than your old schemes, more of your investment returns stay invested rather than disappearing into charges year after year.
The maths is striking: someone aged 40 with £150,000 spread across several pensions who reduced annual charges from 1% to 0.5% could retire with tens of thousands of pounds more by age 65, depending on investment performance.
The vital warning
Here’s where you must be careful. Some older pensions contain valuable guarantees or benefits that could be reduced or lost if you transfer them. As expert Jasmine Birtles from MoneyMagpie puts it: “The mistake is assuming they’re all the same. One old pension could be quietly charging more than it should, while another could contain guarantees that would be incredibly expensive to replace.”
Before moving any pension, spend time understanding what you’ve got. Check what benefits you could lose. If you’re unsure where your old pensions are, use the Government’s free Pension Tracing Service to track them down.
Consolidating your pensions can absolutely make excellent financial sense. Just make sure each one gets its own health check first – it could be one of the most valuable financial decisions you ever make.