Why you should consider pension consolidation

by Charlie Sammonds

For most of our working lives, retirement can feel like a long way away. Plans tend to focus on the short to medium term, with distant concerns about financial security in retirement taking a back seat. 

It’s important to get a handle on your retirement savings early. The earlier you start to get organised, the more you’ll benefit over the long run. This has become particularly important as inflation has skyrocketed and the cost of living has increased – it’s become more difficult to save and cash savings are being eroded over time. 

Here, we’ll take a look at why you might want to bring your various pension pots under one roof.


It’s easy to lose track 

According to research from 2017, the average UK worker will have 12 jobs over their lifetime. This means a change of employer every five years or so on average. 

While there is a lot of overlap, not every employer will use the same workplace pension service. This means you might end up with a few different pots after a while, particularly if you throw a self-invested personal pension (SIPP) into the mix. 

This means that pension pots are often left to stagnate. In fact, over one in five (22%) of people report having lost track of a pension pot at some point in their career. This adds up to a staggering £37 billion in lost cash – by 2050, the Department for Work and Pensions predicts there could be 50 million individual dormant or lost pots. 

It’s worth asking yourself: do you have a clear view of exactly where your hard-earned workplace pensions are sitting and how well optimised they are? 

How to consolidate your pensions

Fortunately, tracking down and consolidating pensions is something the UK government is helping with. In 2016, the government launched a free service that helps people to track down any lost pots – it is, after all, in the country’s interest for people to save for retirement. 

It’s a straightforward service – follow this link to access it. All you need to provide is the name of the employer or workplace pension service, along with your National Insurance number. From there, you can track down your provider and policy number. 

Once you have the details for your pension pots, you’ll need to get in touch with your new provider. Most providers will handle the process from here – they’ll contact your current providers and initiate the transfer on your behalf.

InvestEngine is also set to launch its very own self-invested personal pension (SIPP)! With an InvestEngine SIPP, you’ll have full control over what you invest in, with all the tools that make building your portfolio effortless. Register your interest for exclusive access below. 

The benefits of pension consolidation

Once you’ve got a clearer picture of where your pension pots are, the question becomes about what to do with them. One solution is to consolidate them, to bring them together in one place for greater visibility, better control and potentially higher returns.

Here are the reasons you might want to consider consolidating your pensions:

  • Control. If you have numerous pensions spread across different providers, it means you have to manage them separately. It’s easy to lose track of key performance metrics like performance and fees. Bring them all together and suddenly they become manageable. 
  • Simplicity. It is, simply, time consuming and hard work to keep on top of multiple different pension pots. You need to set aside time to assess their performance, make any changes where possible, or consider switching providers. Doing this once beats doing it four, or even five times. 
  • Planning. When it comes to planning for your retirement in more detail, having one pension pot makes the process so much easier. You need to decide how much you want to take out per year, and for how long – this is much easier to do with one provider, particularly when it comes to actually taking the money. 
  • Lower fees. Pension providers will often (but not always) charge a higher fee on smaller pots. This means that, rather than paying one lower fee, you could be paying high fees on multiple smaller pots. One large pot with one single provider could simplify things. 

Of course, as with anything relating to long-term finances, each individual situation is different. It’s worth doing your research before making any significant decision (like switching pension provider). 

Important information

Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.

This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.

Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.

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