How many pensions can I have in the UK?
How many pensions can you have in the UK? There's no legal limit, but juggling multiple pots can complicate your retirement planning. Here's what you need to know.
There’s no legal limit on how many pensions you can have in the UK. In fact, it’s surprisingly common to have multiple pension pots.
The UK system means you open up a brand new pension each time you move employers. You can end up with multiple pension plans by the time you reach midlife and beyond.
But is having multiple pots actually a good idea? It can make it tougher to both keep an eye on fees and work out if you’re on track for retirement.
There’s no legal limit on how many pensions you can have in the UK.
Having multiple pensions can be a hassle, but some older pensions are worth keeping.
Combining pensions can be a great option, especially as you approach retirement.
Pension payments are limited to £60,000 each tax year (including employer contributions) or your taxable income, whichever is lower.
A financial adviser will be able to help you plan ahead, select the best providers and make sure your retirement planning is on track.
What are the main types of pension?
There are several types of pension in the UK. The table below provides a brief summary.
| Type of pension | Also known as | How it works |
|---|---|---|
| State pension | New State Pension | You build up entitlement based on the number of qualifying years you pay National Insurance or receive NI credits |
| Workplace - defined benefit | Final or average salary pension | You build up a guaranteed entitlement based on your years of employment and salary |
| Workplace - defined contribution | Pension pot or auto-enrolment pension | Contributions are invested, and you build up a pension pot over time |
| Private - defined contribution | SIPP, stakeholder pension | You set this up and contribute yourself. Contributions still benefit from tax relief |
What are the pros and cons of having multiple pensions?
Having multiple smaller pension pots can make retirement planning seem like a chore. But there are sometimes some surprising advantages.
Having multiple pensions can be a hassle, but some older pensions are worth keeping.
Defined benefit pensions offer a guaranteed income you’re not exposed to the ups and downs of the stock market.
Some older pensions also come with valuable benefits like a lower pension age.
If you’re not sure then speak to a financial adviser who can assess if it’s worth combining your pensions.
Here are the main pros and cons of having several pensions:
| Pros | Cons | |
|---|---|---|
| Employer contributions | It’s definitely worth keeping your current employer scheme so you can benefit from employer contributions. | None. |
| Scheme rules | Some older schemes are worth keeping, especially old defined benefit schemes with guaranteed income. | Some legacy schemes aren’t subject to newer rules - eg. the 0.75% price cap. |
| Admin | No immediate paperwork. You won’t have to spend time now contacting multiple providers. | More long-term hassle. You’ll have to juggle multiple piles of paperwork in the future. |
| Fees | Some workplace schemes charge lower fees. | Older schemes may charge higher fees - check with your provider. |
| Hidden perks | Some older schemes have hidden perks like a younger retirement age, guaranteed annuity rate or higher tax-free amounts. | Older schemes often don’t have access to the latest features like more choice of investments. |
| Retirement planning | Retirement planning could be easier if you have a defined-benefit pension with guaranteed income as one of your pensions. | Managing planning is trickier with multiple defined-contribution pensions. You’ll need to juggle several investment and withdraw strategies. |
Can I combine pensions?
Yes, you can combine multiple pensions under one roof. It can be a great option, especially as you approach retirement.
However, there are some restrictions, especially if you have a pension that includes guarantees, like a defined benefit pension.
If you have a defined benefit pension worth over £30,000, you’ll need to speak to a financial adviser before transferring to a defined contribution scheme.
How do I consolidate my pensions?
If you do decide to consolidate your pensions, then here’s a summary of the steps you should take.
| Step | What to do |
|---|---|
| Trace | Find old pots and gather paperwork. |
| Check | Call providers to ask for a transfer value statement and ask if you will lose any guaranteed benefits. |
| Choose | Decide where to move your pension - consider fees, service and investment options. |
| Advice | Please note that you must legally consult an adviser if you’re transferring a defined benefit pension worth over £30,000. |
| Move | Fill in the transfer forms - your new provider will liaise with your old provider and handle the transfer. |
Can I pay into multiple pensions?
Yes, you can pay into multiple pensions at the same time.
It’s particularly common for people with an existing workplace pension. They can continue to benefit from contributions from their employer, while also paying in separately to their own private pension.
What is the limit on pension payments?
Pension payments are limited to £60,000 each tax year (including employer contributions) or your taxable income, whichever is lower. Your contributions can be spread across different pension schemes.
If you haven’t used your full £60,000 pension allowance, you may be able to pay in more in the current year, as long as you have enough income. Read more here on the carry-forward rules.
| Income | Standard pension allowance | Unused pension allowance from previous years | Maximum annual pension contributions |
|---|---|---|---|
| £35,000 | £60,000 | £20,000 | £35,000 |
| £70,000 | £60,000 | £20,000 | £70,000 |
| £100,000 | £60,000 | £20,000 | £80,000 |
What are the tax rules if I pay into multiple pensions?
UK pensions benefit from tax relief, which means you get an extra boost from the government. However, tax relief varies by scheme.
| Type of scheme | How tax relief works | What do I need to do? |
|---|---|---|
| Workplace net pay scheme | Your pension payments are made before tax, so tax relief is applied automatically | Nothing |
| Workplace salary sacrifice scheme | Tax relief is applied automatically - you also save on National Insurance | Nothing |
| Workplace relief at source scheme | Tax relief of 20% is paid automatically | Higher or additional-rate taxpayers need to apply to receive a tax rebate for the additional tax relief owed |
| SIPP or other private pension | Tax relief of 20% is paid automatically | Higher or additional-rate taxpayers need to apply to receive a tax rebate for the additional tax relief owed |
Should I get financial advice before making changes?
Yes, it makes sense to get financial advice before making changes to your pensions.
Consolidating your pensions and managing your retirement across several pensions can get complicated, and that’s where financial advice comes in.
An adviser will be able to help you plan ahead, select the best providers and make sure your retirement planning is on track.
Unbiased can match you with a qualified financial adviser based on your needs.
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