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When should you consolidate pension pots?

Written by Retirement Line

Last Updated: 28th February 2024

Your guide to pension consolidation

Pension consolidation is a popular option for people looking to streamline their financial affairs. Choosing to consolidate pension pots from multiple providers into one scheme could have a number of potential benefits. But is it a good choice for everyone?

In the last few years, new companies such as PensionBee specialising in personal pension consolidation have opened. Established UK providers such as Standard Life, Aviva and Scottish Widows also offer consolidation services.

But should you consolidate pension plans into one scheme when you are very close to retirement? In our guide, we look at the pros and cons of consolidation, finishing with a focus on pre-retirement issues.

On this page:

  • What is pension consolidation?

  • What types of pensions can I consolidate?

  • When might I consolidate pension pots?

  • How to consolidate pension pots

  • What are the benefits of consolidation?

  • Are there any drawbacks of pension consolidation?

  • Who should I consolidate pension plans with?

  • Small pot lump sums

  • Should I consolidate pension plans close to retirement?

  • Making an informed decision

What is pension consolidation?

Choosing to consolidate pension pots (pension savings) could help you simplify your retirement planning. It’s an option if you have saved into more than one pension, for example if you have changed jobs a few times and joined a different scheme each time.  

When you consolidate your pension pots, you merge two or more pots into one scheme with a single provider. This can make it easier to keep track of your pension savings, and potentially reduce the fees you pay. But there are also some potential downsides to pension consolidation.

What types of pensions can I consolidate?

Pension consolidation is typically something to consider for your defined contribution pension schemes. Also known as money purchase schemes, these include:

  • Workplace pensions. You might have saved into workplace pension schemes with some or all of your previous employers. Most workplace schemes nowadays are defined contribution, as the trend has been to move away from defined benefit schemes.

  • Private pensions. These are pensions you set up yourself and include stakeholder pensions and self-invested personal pensions (SIPPs). These can typically be merged into a single scheme.

Please note that not all providers let you transfer your pension savings to another scheme. Your provider will be able to confirm this for you.

Defined benefit schemes

This guide is about consolidating defined contribution schemes. But if you are in one or more defined benefit (DB) schemes - also known as final salary schemes - you may be able to consolidate by ‘transferring out’ to a defined contribution scheme.

However, there are risks with doing this. For example, you may lose valuable benefits such as inflation protection on your income once you retire. You will also run the risk of your pension savings falling in value if the new scheme experiences poor investment performance.

Joining a defined contribution scheme may however give you some flexibility. For example, it may enable you to access a lump sum or income earlier. 

Transferring out of a defined benefit scheme is a big decision, and it is recommended that you get independent financial advice before acting. It is in fact a legal requirement to take advice in some circumstances.

Please also be aware of fraudsters who target people with pension savings. If someone contacts you offering help to transfer your pension pot to another scheme, it could be a scam. You can check their credentials through the Financial Conduct Authority.

When might I consolidate pension pots?

You have two main options when it comes to consolidating defined contribution pensions:

1. Consolidate into one of your existing plans

You may decide to choose one of your existing pension plans and consolidate your other pension pots into that plan. This might be an attractive option if you prefer to continue with one of your pension schemes.

For example, if you are happy with a scheme’s blend of features, flexibility, investment options, ease-of-use and fees, you may wish to consolidate all your pension pots into that scheme.

2. Consolidate into a new plan

Another option is to consolidate your pension pots into a new plan with a different provider. You may wish to do this if you prefer a new plan to any of the schemes where you currently have pension savings.

Established pension scheme providers including Legal & General, Aviva and Standard Life all offer a facility to consolidate your pensions into a new plan with them. Companies that have entered the market more recently offering the same service include Nest, People’s Pension and PensionBee.

How to consolidate pension pots

The process for consolidating your pension pots will depend on your existing schemes and the one you wish to consolidate with. You will need to check with the schemes to find out how to complete your own consolidation. 

Some processes will be especially simple, done through easy-to-use online tools. Others may involve paper form-filling. Look at each scheme’s website or your online account (if you have one) or contact them for information about their process. 

Remember also that you may have lost track of one or more of your pension plans. For help to locate your old pensions, a good starting point is our guide: How to trace lost pensions.

What are the benefits of consolidation?

There are several potential benefits of merging some or all of your pension schemes into one:

Making things simpler

A potential benefit of pension consolidation is that it might simplify things. By bringing all your pension savings into one account, it can make them easier to manage. 

You’ll just have one scheme to monitor and manage, typically through a handy online facility. This could help you maintain a clearer understanding of how your retirement savings are doing. It could also make it easier to make additional contributions to your pension pot, if that’s something you wish to do.

Control over your investments

Consolidation can also make it simpler to manage the investment side of your pension savings. Rather than having money invested across multiple schemes, consolidation lets you choose and track a single investment strategy. 

Consolidating may also give you an opportunity to choose a pension scheme provider with a better investment track record than your current providers. However, as always with investment, past results aren’t necessarily an indicator of future performance.

If control over your investments is especially important to you, you may consider consolidating your pension schemes into a self-invested personal pension (SIPP). These schemes typically give you a wider choice of investments than workplace pensions.

Lower costs

Having multiple pension accounts can result in duplicate fees and administrative costs. Consolidating may also give you the opportunity to choose a pension provider with lower fees. Some providers offer additional cost savings for larger consolidated funds. Cost savings may ultimately boost the value of your pension fund. 

However, make sure you understand the fees and costs of any schemes you are thinking of moving from or to. It’s not guaranteed that consolidation will save you money on fees.  

Easier retirement income planning

Consolidating your pensions can provide a clearer picture of your retirement savings. This might be useful when creating a retirement income plan. With all your pension funds in one place, you may find it easier to make informed decisions about when to retire and your retirement income options.

Are there any drawbacks of pension consolidation?

Pension consolidation offers several potential benefits, but there are also possible drawbacks:

Costs and penalties

Many pension scheme providers will let you switch your fund to another provider with no costs or penalties. However, some schemes may charge exit fees or impose penalties for leaving them. Also, a new scheme you are considering may charge set-up fees. These charges can reduce the overall value of your pension pot. 

Something else to check is whether a new scheme has higher annual fund management charges (platform fees), service charges or management charges than your existing scheme/s. It's crucial to weigh any additional costs against the potential benefits of consolidation. 

Loss of benefits

Some pension schemes come with ‘safeguarded’ or ‘flexible’ benefits such as a guaranteed annuity rate (GAR). You may lose these valuable benefits if you consolidate pension schemes with them. If you are in a pension scheme with benefits, it may be best to keep it separate rather than consolidating into another scheme.

You must take regulated financial advice before leaving a pension scheme with safeguarded benefits worth more than £30,000. This rule is for your protection and an adviser will be able to help you weigh up the pros and cons.

Limited investment options

Consolidation can sometimes limit your investment choices. Some pension providers offer a narrow range of investment options, which may not align with your financial goals or attitude to risk. If you consolidate into a pension with limited investment choices, you may miss out on some investment flexibility.

Some potential pros and cons of consolidating pension pots






Making life easier with just one pension scheme to deal with. 


Exit and set-up fees.


Just one investment fund to monitor.


Loss of benefits such as a guaranteed annuity rate. 


Switching to a scheme with better investment performance. 


Losing some investment choice.


Lower costs and fees.


May be better to keep some pots separate when buying an annuity (see below)


Easier retirement planning.


Your time will be needed to consolidate.

Who should I consolidate pension plans with?

If you decide to consolidate pension savings into one scheme, it is important to consider carefully which pension plan and provider to consolidate to. Take a close look at the usability and features of schemes you are considering. Perhaps even more importantly, make sure you understand each scheme’s costs, and their investment options and performance.

In an FT Adviser article on pension consolidation, former Pensions Minister Steve Webb from pension consultancy LCP says: 

“For the consumer, consolidation has the potential upside that you have all your pensions in a single, modern, good value DC arrangement with which you engage. But the risk is that the consolidation battle is won by the provider who has the best app or the best PR and not necessarily the one that will provide the best value.”

Small pot lump sums

Another issue you may need to consider before consolidating pension schemes are the ‘small pot lump sums’ rules.

This option lets people with up to three pension pots worth less than £10,000 each take all of their money without it affecting their annual allowance or lifetime allowance. Up to 25% of each lump sum will be tax-free, with the remaining 75% taxed as income.

Keeping some of your savings in smaller pots may therefore be tax efficient if you have considerable pension savings in other schemes, and if you are considering taking lump sums from your small pots while still paying into your other schemes. However, we suggest you take professional pensions advice on such matters. 

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Should I consolidate pension plans close to retirement?

As we have seen, there are a number of potential pros and cons of pension consolidation. But what about when you are just a few months or weeks away from wanting to turn your pension pots into retirement income? 

If you are considering flexi-access drawdown as a retirement income solution, we suggest you talk to a financial adviser who specialises in drawdown. There may be cases where consolidation of DC schemes is beneficial, and an adviser will be able to assess what’s suitable for you based on your own circumstances. Retirement Line will be happy to recommend an adviser who can help.  

If you are very close to turning your DC pension savings into guaranteed income with an annuity, there may be little to gain from consolidation. For example, potential cost savings or extra choice of investment funds may be negligible if you are looking to arrange an annuity in a few weeks.

There are in fact cases where it can, at times, be beneficial to keep your pension pots separate ahead of buying an annuity. These might include cases where:

  • A pension sharing order is in place regarding one or more of your pension pots.

  • You have already accessed your 25% tax-free cash allowance from one or more schemes, but not from all your pension schemes.

  • You wish to exercise your right to access your pension funds from one or more schemes before age 55 due to ill health.

  • You wish to flexibly access a small proportion of your pension funds from one or more schemes.

But typically, and outside of circumstances such as these, it doesn’t matter a great deal whether you consolidate or not in terms of arranging an annuity. Retirement Line can liaise with your pension schemes and your chosen annuity provider to set up an annuity for you, no matter how many pension pots you have.

Making an informed decision

You may feel able to make a decision about whether to consolidate your pension pots based on your own knowledge and research. This could include talking to your existing pension providers and any  new schemes you are interested in to gather relevant information about costs, fees, benefits, investment performance, ease-of-use and so on.

The government-backed Money Helper website also has useful information. You may also wish to seek specialist guidance or advice before making a decision. 

Retirement Line’s guidance team will be happy to discuss your own personal situation and provide information and guidance on the implications of consolidation in terms of buying an annuity. This service is provided without any obligation to proceed. If we arrange an annuity for you, we will be paid a commission from the provider, which is taken into account when calculating their annuity rate. 

Our comprehensive annuity service also includes:

  • Giving you comprehensive information to help you choose the right annuity.

  • Helping you shop around by comparing the best annuity rates from leading providers. 

  • Checking your availability for an enhanced annuity. This is a type of lifetime annuity that pays more income if you have a medical condition or make certain lifestyle choices, such as smoking or drinking. 

  • If you decide to buy an annuity, liaising with your pension scheme/s and chosen annuity provider until your annuity is in place.

Just call us on 0800 652 1316, request a call back or email us at and we will be delighted to help.

Click here for your free, no-obligation annuity quote

Consolidating pensions is a complex area and may not be suitable for everyone. This article is for information only and is not intended to serve as advice on whether you should consolidate your pension pots. Please seek further information, guidance or advice in respect of your own circumstances.

Call now and talk to an Annuity Specialist about how we can boost your annuity income in retirement

0800 652 1316

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