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Should I consolidate my pensions? The pros and cons

Do you have more than one pension? Should you consolidate them?

Here are the advantages and risks to consider before consolidating your pensions.

Many of us have several different pension plans throughout our working life.

Some might be 'defined benefit', where we are promised a set amount of money from a certain age, while others are 'defined contribution', where the only certain thing is what we or our employer have put in, plus any investment returns.

So, is it worth consolidating your pensions?

It’s natural to ask when we receive many different annual statements showing that some pensions are performing better than others.

And when you have to write many change of address letters when you move, you might wonder if you need all those pension plans.

Here are the pros and cons to consider.


  • Consolidating your pension could help you take advantage of better investment options.

  • Consolidating could mean getting rid of higher-charging plans.

  • Your administration is easier if you don’t have to deal with multiple pension plans.

  • It may not be worth consolidating pensions if you're on a defined benefit plan.

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The pros of consolidating your pensions

1. Investment performance

Some pensions have better investment options than others, so consolidating could help you take advantage of those and get rid of underperforming ones.

This is the biggest reason to consolidate since investment performance is a key factor in how much your pension grows and how much income you get. 

Poor investment performance can happen for a variety of reasons.

In older pension plans, you may be limited to a 'managed' pension fund run by the provider, which they may not have managed well or actively.

In other pensions, there may be a better choice of funds, but it may still be limited – some 'stakeholder' pension plans fall into this category.

Or it may simply be down to your original choice of investment funds, which needs reviewing and updating.

2. Charges

Charges levied by pension plans are also important.

Consolidating could mean eliminating higher-charging plans (typically older ones), but it is not always easy to find information on the costs of a particular pension plan.

3. Making life easier

Administration is easier if you don’t have to deal with many pension plans – for example, with changes of address and dealing with annual paperwork.

Also it may be easier to turn your pension into an income at retirement if you have fewer plans to deal with.

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The cons of consolidating your pensions

1. The benefit of defined benefit pensions

If you have any defined benefit ('final salary') pensions, it is rarely worth moving those into a defined contribution (or 'money purchase') plan.

That’s because you would take on the investment risk instead of the pension scheme.

There may be additional benefits, such as entitlement to a bigger lump sum, which you would lose.

Having said that, if you are concerned about the security of your pension in your employer’s pension scheme, you may be happier moving it elsewhere and having it under your control.

2. Added advantages

Some types of defined contribution plans have additional benefits you would lose if you move that pension money elsewhere.

That could include a guaranteed annuity rate (the rate at which your pension money is turned into an income) – this will almost certainly be higher than you would get on the open market.

It could also include a higher than normal tax-free lump sum entitlement (25% is the normal maximum).

3. Investment detriment

If your pension is invested in a 'with profits' fund, there may be a 'market value reduction' applied.

Although that isn’t necessarily a show-stopper (the reduction might be quite small), it certainly needs considering.

4. The cost of consolidating

For most people, asking a financial adviser to look at their pensions is the best option.

That way, you can be sure that all the important factors are considered. But you do have to consider the cost of getting financial advice.

Finally, you will be responsible for some of the work involved in consolidating, such as digging out policy numbers and addresses.

But if the result is an up-to-date pension plan with the flexibility you require, one that you feel comfortable with and confident in, it will be worth the effort.

Need help consolidating your pension?

Consolidating your pensions can be a complex decision with many factors to consider.

While there are potential benefits, there are also risks to consider.

An independent financial adviser can assess all your options, crunch the numbers, and help you determine if consolidation is right for you.

Let Unbiased match you to your perfect financial adviser today.

Get pension advice
We’ll find a professional perfectly matched to your needs. Getting started is easy, fast and free.

About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.