Pension consolidation

What is pensions consolidation?

Pensions consolidation is the process of combining multiple pension pots into one scheme. You might already have a pension that you are happy with and transfer other schemes – from previous jobs perhaps – into it. Or, you might take out a new pension, such as a Self-Invested Personal Pension (SIPP) and transfer one or more of your existing pensions into it.

Why should I consider pensions consolidation?

From convenience to cost, there are number of reasons why you might think about merging pensions.

Easier planning

Keeping all your pension savings in one place should make it easier to keep tabs on the progress of your investments, see how much you have saved and plan your retirement income. With only one provider, there should be less admin to deal with too.

Lower costs

Charges on older style pensions from life insurance companies can be expensive – particularly if you are no longer paying into them. Pension charges are often percentage based and while 1% a year might seem trivial, that’s actually £1,000 a year on a £100,000 pot. Over time that could take a serious chunk out of your pension’s growth. Charges on more modern pensions, such as an online SIPP, are likely to be much lower depending on the investments you choose.

Better investment choice

A SIPP, or another more modern personal pension, may offer you a much wider choice of investments than an old workplace pension. An online SIPP should offer you access to most funds, investment trusts as well as shares and ETFs (Exchange Traded Funds). If portfolio building isn’t for you, most platforms will also offer ready-made portfolios and recommendations for quick start core holdings.

Consolidate other investments too

If you hold a pension on your investment platform, you might also be able to move other investment products over. This could include stocks and shares ISAs, junior ISAs and trading accounts. This would enable you to see all your investments in one place.

Can I get higher returns by consolidating my pensions?

That depends; your pension’s performance is primarily driven by your choice of investments, rather than the pension ‘wrapper’ itself.

However, if pensions consolidation encourages you to engage with your retirement saving and you are able to switch into better performing investments, you may be able to boost your returns. You can also keep more of your investment returns if you consolidate in a pension with lower charges.

Can I transfer a defined benefit pension into my pot?

Consolidating defined contribution pensions is reasonably straightforward, but it’s less so if you’ve got a defined benefit – or final salary – pension in the mix.

It is possible to transfer a defined benefit pension into a defined contribution pension, but it is considered high risk for many people as it means giving up a retirement income that is guaranteed for life.

This is why you need to seek independent financial advice first if your DB pension has a transfer value over £30,000. If you don’t get a transfer recommendation from an independent financial adviser it is unlikely that a reputable SIPP platform would accept the transfer.

How to consolidate your pensions

Pensions consolidation might sound like a mammoth task but the process itself shouldn’t be too complicated. The harder part is making the decision to do it in the first place.

To start off with you’ll need a pension to merge your other pots into. This might be a new account you open for the purpose or a pension you already have.

To start the pensions consolidation process you need to contact the provider of the pension you’re keeping. You’ll need to provide details of the schemes you want to move and authorise the transfer.

You’ll also be asked whether you want a cash or in-specie transfer. With a cash transfer you’ll cash in your investments in your old pensions before buying new ones in your current pot. With an in specie transfer the actual investments are moved over without selling them, but this is only possible if the new provider offers the same investments.

The legwork of moving the money over is then completed by the pension providers involved.

The process should be completed within two to six weeks, unless you’ve opted for an in-specie transfer which may take a few weeks longer.

Merging pensions also provides a good opportunity to think about whether you have any old pensions from previous jobs that you may have lost track of.

Learn how to find and trace lost pensions with our guide.

The benefit of combining multiple pensions with ii

Low cost

Unlike most other providers which charge you a percentage of your assets; we charge a low, flat subscription fee. This means that with ii, the more your pension grows the more you save! You can invest more… and save more. 

With an ii SIPP, you could start consolidating all your pensions for as low as £5.99 a month on our Pension Essentials plan. 

Learn more about our charges.

Convenience

Transferring all your pensions into our SIPP makes keeping track of your retirement savings simpler and easier to manage. You'll be able to see everything in one place, alongside your other investments and all under a single monthly fee.

Learn more about consolidating with us.

Flexible retirement options

When you reach 55 (57 from 2028), you'll have a range of options for taking an income from your pension. From one off tax-free lump sums to monthly payments - you'll be able to do it with us. Better yet, unlike many other providers, we don't charge any extra for this.

Learn more about taking income from your pension.

What pensions can I transfer to ii?

You can transfer most types of pensions to the ii SIPP, including:

• Personal Pension Plans
• Other SIPPs
• Stakeholder Pension Plans
• Retirement Annuity Plans
• Executive Pension Plans (EPPs)
• Occupational Money Purchase Plans
• Small Self-Administered Schemes (SSAS)
• Defined Benefit Occupational Pension Schemes

Is pensions consolidation right for you?

Combining pensions can save you money and make your retirement savings easier to manage. It’s not for everyone though and there are several things to consider.

• Will consolidating pensions help you meet your pension saving goals? Easier management, lower charges so you keep more of what you make, more opportunities for growth?
• Will it mean you need to give up certain benefits, like guaranteed annuity rates, the ability to retire earlier, bonuses, or guaranteed growth rates? Always check before you transfer.
• If you are transferring into a SIPP, are you happy to take responsibility for choosing investments and managing your pension?
• Are there any exit fees? There may be fees from your old pensions to exit them early. These are capped at 1%, but only if you are 55 or over (rising to 57 in 2028).

Watch out for pension scams

If you are thinking about moving any of your pensions, it’s important to be aware of pension scams. Be wary of any adviser or pension provider that approaches you directly and encourages you to transfer your pension.

It’s safer to transfer your pensions into a pension you already have or one that you have independently selected.

If you have concerns you can check the FCA Warning List and try its ScamSmart Tool here.