Should I con­sol­i­date my pen­sions?

One pot is eas­ier to man­age but trans­fer­ring could lead to large exit fees

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If you’ve changed jobs sev­eral times you’ve prob­a­bly got lots of pen­sions with dif­fer­ent providers.

It can be dif­fi­cult to keep track of how much money you’re build­ing up, which makes con­sol­i­dat­ing your pen­sions into one pot a tempt­ing op­tion.

But trans­fer­ring can some­times re­sult in high charges and the loss of valu­able guar­an­tees. It’s ex­tremely im­por­tant to check the terms and con­di­tions of your poli­cies and weigh up the pros and cons be­fore pro­ceed­ing.


It’s a lot eas­ier to man­age one pen­sion than it is to man­age five. You can see how much money you’ve saved, there’s only one an­nual state­ment to read and it’s sim­pler to track and switch in­vest­ments.

Mod­ern pen­sions let you see where your pen­sion is in­vest­ing and how it’s per­form­ing in real time, so you can fig­ure out if you’re on track to meet your fi­nan­cial goals.

Con­sol­i­dat­ing your pen­sions can also give you greater con­trol. Alis­tair Mc­Queen, head of sav­ings and re­tire­ment at Aviva, says your cur­rent pen­sion may limit your fund choices or, in the case of some trust-based pen­sions, the trus­tees may dic­tate the fund you must have.

If the new pen­sion al­lows for self-in­vest­ment you’ll have far greater choice. You can pick the in­vest­ments that suit your in­di­vid­ual risk pro­file and ca­pac­ity for loss.

You could even end up with a big­ger pen­sion pot. This is be­cause older pen­sions of­ten have higher charges, so mov­ing your pen­sion to a mod­ern one could re­duce the cost of ad­min­is­tra­tion and fund man­age­ment.

‘A small re­duc­tion of 0.5% a year might not sound like a lot, but it could in­crease your even­tual pen­sion pot by 15% over your whole work­ing life,’ Mc­Queen says. ‘Charges are also usu­ally lower the big­ger your pen­sion pot is.’


It’s not a good idea to trans­fer a work­place pen­sion in which you are still an ac­tive mem­ber. Your em­ployer will be pay­ing in money and you’ll prob­a­bly lose this con­tri­bu­tion if you de­cide to stop the pen­sion and trans­fer it.

Even if you have pen­sions in which you’ve stopped con­tri­bu­tions, trans­fer­ring might not be the right de­ci­sion.

Mc­Queen says that al­though old pen­sions gen­er­ally have higher charges, this isn’t al­ways the case.

In ad­di­tion, some older pen­sions pay loy­alty bonuses, which are added if you keep your pen­sion for a long time. You should weigh up the value of the loy­alty bonus against any ad­van­tages a new pen­sion would bring, such as lower on­go­ing charges, more choice and greater flex­i­bil­ity.

Any­one own­ing a with-prof­its pol­icy could be sub­ject to a market value re­duc­tion (MVR or MVA) charge when trans­fer­ing out. Phoenix Group says these ex­ist so the true market value of a pol­icy is paid, en­sur­ing the re­main­ing pol­i­cy­hold­ers in the fund aren’t dis­ad­van­taged.

If you’ve ever been part of a de­fined ben­e­fit/fi­nal salary pen­sion scheme or if you have pen­sions with guar­an­teed an­nu­ity rates, it’s im­por­tant to check what will hap­pen to these guar­an­tees if you move your money.

If you’ve got a pen­sion with guar­an­teed ben­e­fits that’s worth more than £30,000, you have to take in­de­pen­dent fi­nan­cial ad­vice be­fore you move it.


Some pen­sion providers will apply early exit fees when you trans­fer out. Jasper Martens, spokesper­son for Pen­sionBee, says he’s seen some in­stances where the fee has been in ex­cess of 75% of the pen­sion’s value.

Exit fees are be­com­ing in­creas­ingly rare but it’s worth clar­i­fy­ing with your provider what the charges will be.

You may also in­cur fi­nan­cial ad­vice fees and the less ob­vi­ous cost of time out of the market.

‘Dur­ing the time be­tween the old plan clos­ing and the new plan start­ing, the money won’t be in­vested any­where so peo­ple could lose out on market in­creases. Of course, the op­po­site is also true – they could ben­e­fit from fall­ing mar­kets,’ ex­plains Jamie Clark, a busi­ness devel­op­ment man­ager for Royal Lon­don. IT’S A LOT EAS­IER TO MAN­AGE ONE PEN­SION THAN IT IS TO MAN­AGE FIVE


Trans­fer times can vary hugely. Thorn­ton Wells, wealth man­age­ment con­sul­tant at Mat­ti­oli Woods, says some in­sur­ance-based con­tracts trans­fer in a mat­ter of days whereas older con­tracts can take weeks.

Some providers use an in­dus­try stan­dard trans­fer process called Origo. It takes around six to eight weeks, but if the providers have good ser­vice lev­els and it’s not a com­plex case it can take eight days.


There are lots of things to think about be­fore trans­fer­ring to an­other pen­sion.

Look at whether the new pen­sion of­fers the in­vest­ment choices you want and all the op­tions you need, such as reg­u­lar in­come with­drawals, ad-hoc with­drawals and the abil­ity to view and change your in­vest­ments on­line.

An­a­lyse the charges. Mc­Queen says some pen­sions have a sin­gle fee whereas oth­ers have fees for tak­ing in­come with­drawals, buy­ing and sell­ing in­vest­ments and buy­ing an an­nu­ity.

‘You should con­sider the charges you will pay de­pend­ing on how you plan to use your new pen­sion, both now and in the fu­ture,’ he adds.

Other fac­tors to con­sider in­clude whether the provider has an exit fee and what their cus­tomer ser­vice is like.


Once you’ve cho­sen a pen­sion call the new provider and ask them if they of­fer a ser­vice that helps you con­sol­i­date your pen­sions.

Most will write to ex­ist­ing providers on your be­half to get the nec­es­sary pa­per­work, so all you have to do is sign and re­turn the forms. Once you’ve re­turned the forms, the trans­fer can go ahead. (EP)

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