Better off together: could combining pension pots boost your retirement income?
The number of pensions Britons hold has grown as job-hopping and automatic enrolment mean workers typically accumulate several pots over their careers, prompting rising interest in consolidating them into one. Combining pension pots can simplify management, cut annual fees, and make it easier to move money out of underperforming funds, with benefits continuing into retirement when accessing savings via flexible drawdown.
However, experts warn consolidation is not automatically the right choice. Auto-enrolment has doubled the number of people saving into private sector workplace pensions to 23 million since 2012, according to the Pensions Regulator, and many also hold personal pensions or Sipps. Before merging pots, savers should check what benefits they might lose, such as guaranteed annuity rates, enhanced tax-free lump sum entitlements, or in some cases the right to access cash from age 55 rather than the rising "normal minimum age" of 57 from 2028, while those with defined benefit pensions face further considerations.
- More Britons hold multiple pensions due to job changes and auto-enrolment
- Consolidating pots can cut fees and simplify retirement access
- Experts warn to check for lost benefits before merging pensions
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Combining pensions means bringing several separate pots into one place, usually to make them easier to track and manage. This has become more of a live question because most workers now build up multiple pensions over their careers, partly through changing jobs and partly because auto-enrolment – the system requiring employers to enrol staff into a workplace pension – has pushed millions more people into saving since 2012.
The appeal of merging pots is straightforward: fewer accounts to keep tabs on, potentially lower charges, and more flexibility to move money away from pensions that are performing poorly. This matters at retirement too, since many people now draw down their pension gradually rather than buying an annuity, and managing one pot can be simpler than juggling several.
The complication is that older or different types of pension can come with valuable perks that are lost if transferred, such as guaranteed annuity rates, larger tax-free lump sums, or the ability to access the money from age 55 rather than the higher minimum age due to apply from 2028. Workplace pensions that pay a set income for life, known as defined benefit schemes, raise further considerations. This is why savers are being urged to check what they might give up before merging pots, rather than assuming consolidation is automatically the better option.
Both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Advocates of consolidation argue that gathering scattered pension pots into one modern, low-cost plan makes sound financial sense for most savers: it cuts down on multiple sets of annual charges, removes the administrative burden of tracking several providers and old paperwork, and makes it far easier to see the full picture of retirement savings and choose a fund that suits one's risk appetite. They point out that many old workplace pensions sit in outdated, underperforming funds with high fees, so moving that money into a well-performing, cheaper plan can materially increase what is available at retirement, and a single pot is simpler to manage sensibly when the time comes to draw down income flexibly.
The case against
Those urging caution argue that consolidation is not a one-size-fits-all decision and can be actively harmful if pursued without careful checks, since older pensions sometimes carry valuable guarantees that cannot be replaced once given up, such as guaranteed annuity rates, enhanced tax-free lump sums, or the right to access funds from age 55 ahead of the rising normal minimum pension age. They emphasise that anyone with a defined benefit pension faces even higher stakes, given the loss of a guaranteed income for life, and that savers should take proper advice and compare exit fees and benefits pot by pot rather than assuming that simplicity and lower charges automatically outweigh what might be lost.