Consolidating or transferring your pensions

In this section we will cover:

• How to consolidate your pensions
• Reasons you should consider consolidating

Consolidating your pensions can be a helpful way of managing them and planning your retirement

Most pension schemes will allow you to transfer your pension pot to another scheme or to a new provider. This could be to your new employer’s pension scheme, a personal pension or a self-invested personal pension (SIPP).  

Before moving your pension, you should ask your current pension provider for a transfer value (more on this later). You should also check that there aren’t any specific benefits, guarantees or existing protections with your pension, such as life cover, that you would lose if you transfer to a new scheme. You also need to ask if there are fees for moving your pension.  Seeking financial advice before transferring any pension is a good idea. 

If you’re thinking about putting your pensions together in one place, you can book a free call to speak to our team to understand your options. If needed, we also offer a paid financial planning service to create a retirement plan that should help you reach your retirement goals. Please note that we provide 'restricted advice', which means we will only make investment recommendations on the products and services that we offer.

Can I transfer a defined contribution pension myself? 

It’s possible to transfer a defined contribution (DC) pension yourself. In order to initiate a transfer you need to contact the pension provider you wish to transfer to, which will carry out the process of transferring and liaising with the previous pension provider. This is standard industry practice.

Once you’ve tracked down all your old pensions, the logistics of transferring your pension can be relatively straightforward. You should contact:   

1. Your current pension provider and check that the pension scheme allows you to transfer some or all of your pension pot. You should establish if there are any fees to transfer out, if you will lose any benefits, features or rights by transferring, and find out the current transfer value of your pension pot.
2. The provider that you want to transfer to, to confirm that it will accept the transfer.

What does pension transfer value mean?

A pension transfer value is essentially the monetary value of your existing pension which can be transferred to another provider. How your pension transfer value is calculated will depend on the type of pension you have.

If you have a DC pension, the transfer value of your pension is the value of the investments at the time you are looking to transfer.  You may need to seek financial advice before transferring a large DC pension.

If you have a defined benefit (DB) pension scheme, the value is calculated based on how long you’ve worked for your employer and your salary. This is also known as the Cash Equivalent Transfer Value (CETV). However, it is important to check fully if you will lose any benefits, guarantees or existing protections that you have built up – such as a set level of income in retirement – before you transfer a DB scheme. It is usually not recommended to transfer from a DC scheme to a DB scheme but you can transfer from a DB scheme to a DC, however this is a significant decision to be made and most schemes would require you to seek financial advice before. It is also worth noting that it is not a reversible decision. Transferring any pension is a significant decision, and most schemes would require you to seek financial advice or contact the Money and Pension Service (MaPS).

There are a number of factors that can affect the pension transfer value for a DB pension: your age, your scheme’s retirement age, life expectancy and the current cost of living. Some providers do not accept DB pension transfers, and the providers that do will require you to seek financial advice before transferring if the value is over £30,000.  If the total is less than £30,000, you must still sign a declaration stating you're aware of the scheme benefits you’ll be losing and are comfortable transferring.

What will transferring my pension cost?

Pension transfer charges will vary between different schemes and providers, so it is important to check these fees before you transfer. 

Some reasons to consider consolidating your pensions include:

1. Getting a clearer picture of your retirement income 

If you have several pensions with a number of different providers – perhaps workplace pensions from previous jobs – keeping track of exactly how much money you have put away for retirement and if you’re on track to retire comfortably can be difficult. Consolidating your pensions can give you a clearer view of whether your current investments will be enough to support the retirement you want for yourself and, if you happen to be off-track, can make it easier to calculate what you need to do to top-up your pension pots.

2. Easier to manage 

Keeping track of old pensions can be challenging. If you decide to put your pensions together, you have fewer details to keep track of, and if you choose a provider that allows you to easily manage your retirement investments online, the process can be simplified further. With your pensions in one place, you can free up additional admin time to do other things. For those that want more control over their investments, it can make it easier to keep track of your wealth, check on investment performance, change your investments and set up regular payments or make one-off contributions to your pension when it suits you.

3. Potentially lower fees

Transferring old pensions and keeping them together could help you to lower the fees you’re paying. While price won’t be the only factor when considering whether, or where, to consolidate your pensions, fees can erode your retirement nest egg. It is worth shopping around to make sure you’re getting good value for money. It’s also worth noting that some pension providers may have additional fees that aren’t immediately obvious such as potential exit fees, making a read of the small print a prudent move, to make sure you avoid any hidden charges.

4. Access to different investments

Each investor is unique, so you may want greater control and choice about where your money is invested, and some customers might choose to consolidate their pensions to a provider that offers a variety of investment vehicles compared to those offering a limited range of funds or default investment styles.

For many people, after their home, their pension could be their largest financial asset. Where your money is invested can be incredibly impactful, both in terms of the returns the investments may generate and also the products and sectors they relate to. For example, by choosing a socially responsible pension your money could support your values, as well as your lifestyle in retirement.

5. Planning for loved ones 

Conversations about finances after a death are never easy, so the process of dealing with finances after a loved one dies should be as worry-free as possible. Having all your pensions in one place can make the process simpler during what is sure to be a difficult time.

Risk warning

As with all investing, your capital is at risk. The value of your portfolio can go down or up and you may get back less than you invest. Pension eligibility and tax rules apply. Before transferring, check you won't lose any benefits or pay any unexpected charges. During a transfer, your investments will be out of the market. Seek financial advice if you're unsure if a transfer is right for you.