Mailbag: Should I combine my pension pots?

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Dear, I have several private pensions from various jobs. What are the benefits of combining them and how do I go about doing it? Keith, 48

Combining the various pension pots you’ve accumulated from different jobs could save you money and provide you with superior returns over the long term. But there are also drawbacks.

We ask Andrew Pennie of retirement planning firm Intelligent Pensions to explain the pros and cons.

He writes: “As we all become more mobile and transient in our working lives it’s not surprising that more and more people are finding themselves with a number of pension benefits in a variety of different schemes.

The decision to combine your pension pots into one fund may sound eminently sensible but as with all things pensions, it is not without complications and potential trap doors.


One of the major advantages of combining pensions for most people is to simplify the paperwork and administration, it is much easier to manage one pension than two or possibly more.

With the introduction of more products with tiered charges you may be lucky and find cost-efficiencies when combining your pensions, particularly as many of the older contracts carried higher charges or fixed costs which can weigh heavily on a relatively small fund.

Having considered cost, it is also important to look at the other side of the equation, namely investment growth. Many of the older style pension contracts offer poor investment choice and a number of the with-profit funds haven’t paid any meaningful returns in many years and are no longer well positioned to deliver stockmarket growth.

With most new pension contracts comes choice and flexibility and from an investment perspective, more choice can help to select the best performing sectors, fund groups and fund managers.


But it is also important to consider the possible downsides.  The cost of transferring from an old pension to a new style scheme may be an important factor to consider.  Is there a penalty charged by your pension scheme to transfer away? Is there a set up charge by the receiving pension scheme? Is it more cost effective to leave it where it is?

Besides cost, there are also a number of benefits that were written into some of the earlier pension contracts, such as guaranteed annuity rates or guaranteed growth rates. In the current low interest environment, these guarantees can be extremely valuable and many people have unwittingly thrown away these highly valuable benefits.

Take advice

It is important to take specialist advice from an FCA regulated pension transfer specialist before deciding whether to transfer your pensions or not. Pension contracts are complex and a suitably qualified adviser will be able to tell you whether transferring is in your interests or not while giving you the additional peace of mind that you have regulatory recourse should the advice turn out to be wrong.

Some pension providers will allow you to transfer without advice, unless you have ‘safeguarded benefits’ (for example a final salary scheme or a plan with guarantees) but remember you do so at your own risk and there is no regulatory safety net if it turns out to have been the wrong thing to do.”

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