Should I Combine My Pensions?

The Government has actively encouraged saving for a pension. Its auto enrolment workplace  scheme has been widely publicised and promoted. What is seldom discussed or understood, however, is what happens to that pension when we move jobs. Cost, and the fear of the unknown, stops many of us asking the question, or seeking advice. Throughout our working lives, we may have up to 11 different jobs, and that potentially means 11 different pension pots. (source: the Pensions Dashboard Prototype Project)

A single job for life is a thing of the past. We now move jobs more often, accruing new pensions as we go. When we move, however, our workplace pensions do not move with us.  When we retire we may have as many pension pots as jobs we’ve had during our working lives. These can be confusing to manage and difficult to understand. Consolidating these pensions may be the answer, but the available options can be similarly difficult to comprehend, and might  involve creating a further pension into which all other pensions can be combined, thus adding further confusion and perhaps cost!

Only about half of the UK workforce can name their pension providers, which may mean that some pension pots go unclaimed when those people come to retire.   Which reports that there are nearly £20bn of pensions unclaimed in the UK.

What Is Pension Consolidation?

We’d seldom run four or five bank accounts, or think that would offer the greatest convenience or best value for money, so why are we happy with multiple pension pots?

With an average of 11 pension pots gathered during our working lives, the personal admin burden of keeping track of our pension pots can feel overwhelming.  With every house move each provider must be updated, if you’d like a valuation, that’s 11 points of contact, let alone remembering who it was that we nominated to receive each one of those pension pots  if we were to die before we retire!

The ABI report that:

  1. Only 1 in 25 people consider telling their pension provider when they move home.
  2. Notifying your bank is viewed as essential but pension providers are often forgotten about.

Combining pension pots into one place, or “consolidating” pensions as we sometimes refer to it, not only means  pensions will be easier to administer but it enables us to make clearer plans for the future, with greater visibility of likely outcomes. With all our pensions held in one place, clarifying any points of issue or making any changes will also be much easier. 

But there are many factors to consider before combining pensions.

What Are The Benefits of Combining My Pensions?

When we think about consolidating pensions, it brings to mind convenience above all else.  Having everything in one place makes life easier.  When we move house, or want a valuation, or an idea of what our income in retirement might be, asking just one provider makes the process far more appealing.  We must get to know our pensions and no longer fear the unknown.  A pension should be more than an unfathomable annual statement that is filed away and avoided, but instead a pot we know, and we’re proud of; a target and a goal that becomes achievable.  This is far easier to achieve if we know, firstly, where our pension is, and secondly, how to find out the value and what it truly means to us.

With our pensions consolidated the risk of us becoming part of the increasing statistic of lost pension pots reduces drastically.  Engaging with your consolidated pot, becoming its “friend” if you like, is a great move.  With one consolidated pension we can understand more, we can make a point of making sure the investments meet our needs and suit our lifestyles.  These lost pots aren’t just lost for many, they are invested in funds we may’ve chosen by default many years ago, that are no longer appropriate for our current or future circumstances.

Fewer pensions means more transparency and more control.  Take ownership of your pots and make a simpler pension picture work for you.   Reduce the admin, lose the hassle, gain control.

Can I save money by combining my pensions? 

Often, workplace pensions have simple and relatively low charges.  It would be fairly unusual to find a new style workplace pension with an annual charge of more than 0.7%.  However, older pensions, (and by “old” we mean maybe 8+ years old), may charge 1% per year, or more.  That mightn’t seem much, but if we think of the impact of that charge over a working lifetime, it could be a sizeable chunk of pension eaten away by charges.

Whilst charges are a big part of “saving money”, “value” can mean so much more than costs alone.  The value of having one single consolidated pension pot, where our investments are kept in line with our wants and needs, cannot be underestimated.  We might take delight in finding out that our pension has an annual charge of 0.1%, but this delight is short lived upon the discovery that the pension fund is held in a cash fund that has zero interest being passed on to us by the provider.  Again, consolidating our pensions and ensuring that the way the pension monies are invested suits us, puts us in control, and we then discover the true meaning of value.

Can I achieve better growth with pension consolidation?

Better growth or more appropriate growth? 

We would all like to see our pension fund value increase  every year as we gaze into a crystal ball that allows us to play the stock market and retire at 55 with visions of yachts and palm trees.  However, in reality (sorry, it’s not as exciting) we need to make sure that where our pension funds are invested is right for us. In our workplace scheme we are often investing in what’s known as a “default” fund.  This will usually be a carefully considered balanced basket of stocks and shares, that takes our years until retirement into account.  

For many of us, this is fine and if it’s not, we can ask our workplace pension adviser or provider for directions as to how to choose something a little more or less risky.  Our default fund, or our chosen investment path, may grow slower or faster than an older pot.  What’s important is that it’s monitored on, at least, an annual basis and we understand how to make changes if we want or need to.  This task is fairly straightforward with one consolidated pension pot to consider, but a fairly laborious and often unfathomable task when multiple pension pots confront us.

Convenience of combining my pensions 

Consolidating your pensions and having the convenience of having all your pensions in one place sounds perfect.  One set of admin, one value to understand, one set of costs, simple!

However, if one of the pension pots that you move has a unique and valuable benefit, this could be lost forever upon transfer - scary right?  Here’s our list of just some of the important things to look out for and yes, it’s pretty long and jargony:

What worries us is that some pension providers are offering to consolidate pensions for their clients (hooray!).  However, they expect customers to tick a box saying that they know that none of the features listed in the table above are in any of the pot they’re moving over and it’s all systems go (yikes!).  We wonder how it’s fair to ask anybody who doesn’t work in the financial services industry to commit to such an important tick….

Once pensions are consolidated, any irreplaceable features from a previous pot could be lost forever.

Let’s have a closer look at some of these features and think about the potential disadvantages that an uninformed decision could create when combining pensions ourselves:

Exit fees

Some pensions, particularly older schemes that date back to around the start of the century, have penalties applied if they’re moved to a new scheme/provider.  This penalty can sometimes be seen in the difference between the current value of the pot and the transfer value and should be specifically disclosed by the pension provider within any valuation statement.  

If your pension is invested in a With Profits fund an exit penalty called a Market Value Adjustment or a Market Value Reduction (MVA or MVR) may exist.  The counter to this is the inclusion of a Terminal Bonus when economic conditions are favourable.  So that’s a potential penalty on leaving a With Profits fund and the potential to miss out on a valuable bonus later on.  For With Profits funds, such penalties and bonuses can be affected simply by moving to a different choice of investment fund with the same proivder, within the same pot.  

Tax Free Cash

At retirement, a modern workplace pension will allow you to take 25% of your fund value tax free.  If you are thinking about switching a pension that was set up before 6th April 2006, you may have the right to take more than 25%.  This valuable benefit would be reduced to the standard 25% upon consolidation  Therefore, if your tax free cash allowance is more than 25%, from a tax point of view you may want to leave this where it is.

Protected Pension Age

Currently, you’ll be able to take benefits from your pension from your 55th birthday if you want to.  It’s possible, if your pension was set up before 6th April 2006 and you were in a “specialist occupation” at the time, (for example, professional sportsperson, actor) that those benefits could be available at a younger age.  Consolidating into a new pot could mean losing these rights forever.

Life cover and Protection

Maybe your old pensions have an additional life cover benefit, or critical illness cover included?  There might be a waiver of premium too.  Such benefits as these may be more expensive or even impossible to replace.  


If your provider tells you that you have a guaranteed annuity rate, guaranteed benefits or bonuses attached to your plan, these could be lost upon consolidation.  

Defined Benefits

A defined benefit (DB) pension scheme is where the benefits you receive at retirement are based on both how many years you’ve worked for your employer and the salary you’ve earned.

DB pensions pay a secure income for life which increases each year.  It is this security of income and the value of the increases that makes DB pots so valuable.

Additionally, your employer is responsible for making sure there’s enough money at the time you retire to pay this secure pension income for your lifetime and may even then go on to continue to pay a pension to your spouse, civil partner or dependants when you die.

There are two types of defined benefit pension, final salary schemes and career average schemes.

If you're in a private sector defined benefit pension scheme or a funded public sector scheme, then it is possible to transfer to a defined contribution pension, as long as you haven't started taking your pension.

However, if you do decide to switch from a defined benefit pension scheme, you are going to be giving up valuable benefits and might well find yourself worse off.  This can still be the case even if you're offered incentives to switch.

As Defined Benefit schemes give you a guaranteed income in retirement, you need to be very careful about including them in any pension consolidation. We think it's essential to get advice from a specialist regulated financial adviser before considering the transfer of a Defined Benefit pension pot.

How To Combine Your Pension Pots

Zippen is a business born out of a clear moral, emotional and market need. It is an advice service that enables people to find, switch and combine (hence ‘zip’) their pensions (‘Zip-pen’) all in one place. We check for, and protect, any valuable pension benefits you may have - taking the responsibility for this into our expert hands, with the aim of creating better outcomes for our customers.

We believe everyone should have access to financial advice and pension management that is convenient, affordable & transparent.

Where pension providers, like Pensions Bee, Smart, Scottish Widows and L&G to name a few, combine pensions into a new, additional pot, taking funds under their management; we combine pension pots into an existing scheme that you already own.

We’ve created a convenient, affordable, accessible, trustworthy and transparent advised solution, with a friendly digital process. Here’s how it works:

The sheer volume of small pension pots that have been ‘lost’ in the system or that IFAs think are too tiny to bother with, led us to launch Zippen.  We trace pots with the aim of consolidating them into an existing arrangement you already have. You can now have all your pensions in one place, without needing any new plan, or having to pay any additional ongoing policy fees.

A small, one off fee 

Our friendly and very clever Zippen bot will work out if your pensions can be consolidated.  Up to this point, there’s no cost to you.  We’ll then charge a fixed fee based on your total pension value.

You may even be able to pay the fee directly from one of your pension pots. See our pricing.

*source Money Helper

Related articles

Start taking control of your pensions

Combine all your pension pots into one plan. It takes just 60 seconds to sign up.

Get Started