Should you combine your old pensions?

Why people combine pensions

Most people who have changed jobs have a defined contribution pension from each employer. Moving them into one place can make sense. MoneyHelper lists the main reasons:

• Lower fees. Older pensions can charge more than modern ones, and small differences add up over decades.
• More choice. A newer scheme may offer better investment options, or flexible ways to take your money, such as drawdown.
• One place to manage. One login, one statement and one set of beneficiary details.

What small fee differences add up to

A £50,000 pot left for 20 years, growing at 5% a year before charges, with the charge taken off that growth each year:

Check these before you move anything

Combining is not always a good idea. Some pensions have features that are lost the moment you transfer, and you can't get them back.

1. Exit fees. Ask your provider if there is a charge for leaving. For people aged 55 or over, the FCA caps early exit charges on existing personal pensions at 1%, and new contracts taken out since 31 March 2017 can't charge one at all. Workplace schemes run by trustees are covered by separate rules.
2. Guaranteed annuity rates. Some older policies promise a guaranteed income rate that is far better than today's. This is often worth much more than any fee saving.
3. With-profits bonuses. Leaving a with-profits fund early can mean losing a final bonus or paying an exit adjustment.
4. A protected pension age. If a pension lets you take money before 57 after April 2028, that right can be lost on transfer. See who keeps 55.
5. Protected tax-free cash. Some older pensions allow more than 25% tax-free. Ask before transferring.
6. Employer contributions. Never move the pension your current employer pays into, unless the new scheme will receive their contributions too.
7. Small pots. A pension worth £10,000 or less can be taken all at once under the small pot rules without triggering the money purchase annual allowance. Merging it into a bigger pot loses that option.

Defined benefit pensions are a different matter

A defined benefit (final salary or career average) pension pays a guaranteed income for life that usually rises each year. MoneyHelper says most people are usually better off leaving it where it is. If it is worth more than £30,000, the law requires you to take regulated financial advice before transferring it into a defined contribution pension.

Not sure which type you have? See defined benefit vs defined contribution.

How to combine your pensions, step by step

1. Find them all. Use the free Pension Tracing Service if you have lost track of an old employer's scheme. It gives you the provider's contact details.
2. Ask each provider three questions: What is my transfer value? Are there exit fees? Does my pension have any guarantees or protected benefits?
3. Compare the total yearly cost of where you are now with where you would move: management fee, fund charges and any platform fee.
4. Start the transfer from the new provider. The receiving provider usually handles it. Don't cash out and pay in again, as that can create a tax bill.
5. Update your beneficiary details with the new provider.

Watch for scams

Pension cold-calling has been illegal since January 2019. If someone contacts you out of the blue about moving your pension, it is very likely a scam. Your current provider must run checks before a transfer and can delay it until you have had a free Pension Safeguarding Guidance appointment if it has concerns.

This guide is general information, not personal financial advice. Rules can change and your situation may differ. For free, impartial help, contact MoneyHelper, or speak to a regulated financial adviser.