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How to consolidate pensions wisely

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This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincolnshire or other local offices.

Consolidating your pensions (“combining” them into a single scheme) can offer a valid way to streamline your retirement savings, potentially reducing fees and management hassle.

However, the process of combining pensions is complex. A lack of information can lead to costly mistakes. Here, our Grantham financial advisers at Castlegate can offer guidance and peace of mind.

Below, we outline some of the key steps to combining pension pots. We hope these insights inspire you and give you more confidence about the pension “landscape”.

Please consider getting independent financial advice before moving to consolidate your pensions.

To discuss your own family financial plan with us, please get in touch to arrange a no-obligation financial consultation at our expense:

01476 855 585

The Importance of Pension Consolidation

Pension consolidation is not always right for everyone. Yet it can offer benefits to specific clients.

Firstly, managing one pension scheme is easier than managing many. Combining pensions into a single “pot” reduces the confusion and burden of keeping track of multiple schemes held with different providers (each with its own unique rules and quirks).

Secondly, this makes performance easier to monitor. You only need to concern yourself with one investment strategy and reporting format. A single “portal” for your retirement savings enables you to assess your portfolio more easily, identifying risks, opportunities and trends.

Another (potential) advantage is more investment choices. Older schemes may only offer a limited range of funds which may not reflect your risk tolerance, investment preferences or retirement goals. A single consolidated pension pot could widen your access to diversified funds and ethical investments.

The Risks of Pension Consolidation

Pension consolidation is not always the best choice for everyone. The process entails moving funds out of an old scheme, which may impose penalties or charges from pension providers.

In some cases, it may be difficult to replace the benefits of your old pension scheme, such as guaranteed annuity rates or enhanced protection.

These two drawbacks highlight the importance of weighing “opportunity costs” when considering combining your pension pots. Do the penalties, charges, or lost benefits outweigh the benefits of combining all of your pension savings? Here, it can help to speak with a financial adviser.

Assessing your “Pension Landscape”

Regardless of what you decide to do with your pensions, it helps to know where they are, how they work and what your savings look like. Therefore, consider compiling information such as the following:

  • Account balances
  • Contribution levels
  • Investment performance
  • Any benefits or guarantees

Take a look at your pension statements and take note of fees and charges, including penalties for early withdrawal or transfers. Determine whether your schemes are eligible for transferring funds out and what the process involves.

Once you have a clearer picture of your “pension landscape,” consider your financial situation, such as your age, retirement goals, risk tolerance, and assets-to-liabilities (net worth).

What are your priorities, and what is important for you in retirement? Understanding yourself, as well as your pensions, can help to illuminate whether combining your pension pots is a suitable strategy for you.

Finding Lost Pensions

Try to make a list of all of your past employers where you likely built up different pension pots (defined contribution pensions). Other jobs may have provided you with defined benefit pensions, such as teaching or the police. These do not offer a “typical pension pot”.

Clues about your pension arrangements can often be found on old payslips, employment contracts, tax documents and correspondence from previous employers. In some cases, you may need to contact old employers for information about your old workplace scheme with them.

There are also useful tools, such as the Pension Tracing Service, by the UK Government, which can help you find contact details for free using an internet search.

Streamlining Your Pension Portfolio

When you consolidate your pensions, it can simplify management, reduce fees and potentially improve investment performance. This frees up more of your time to enjoy retirement, rather than needing to worry about managing multiple pots of money.

It is always a good idea to start by setting clear goals. What do you want to achieve if you were to consolidate your pensions? What are your income needs and lifestyle expectations?

You will also need to survey different pension providers as candidates for your new pension pot. It is helpful to check different fees and charging structures, investment options, and customer service. A financial adviser can recommend suitable options based on your needs and goals.

The Process of Consolidation

Once you have finished sifting through pension providers, how do you move your retirement savings to your new pension pot? Here, we stress seeking professional advice to ensure everything is done properly and safely.

You will need to obtain the relevant transfer forms from various pension providers and fill them out accurately. Existing providers will need to be informed of your intention to transfer.

Additional documentation and authorisations may be required throughout this process. It can be intimidating to many people, especially when faced with long terms and conditions filled with jargon. Working with a financial adviser can put you at ease and highlight the key things you need to know.

Once the transfer process starts, you will need to monitor it and look for confirmation messages once funds have been successfully transferred. Documentation will likely need to be updated to reflect your new arrangements, keeping a clear record of everything for your own peace of mind.

After Consolidation – How to Move Forward

With your pension savings all in one place, now what? Here, a financial planner can assist with crafting a suitable investment strategy to carry your retirement savings forward.

You may require a new strategy to reflect your goals, circumstances and new pension “landscape” (e.g. more investment choices). Using professional guidance, you can select the appropriate funds and assets to reflect your needs and objectives using a single, easy-to-use online portal.

Moving ahead, it will be vital to monitor your pension pot and make periodic, strategic adjustments if your portfolio starts to veer “off course” (e.g. if your chosen asset allocation is no longer reflected by your holdings). Again, a financial planner can assist you with this process.


If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:

01476 855 585