3 reasons why pension consolidation could boost your retirement income

Increasingly, UK savers are losing track of their pensions. In October 2024, an article by Pensions UK showed that, according to a survey completed by the Pensions Policy Institute the total value of lost pension pots had risen by 60% since 2018.

Losing track of your pensions can be costly. Across the 3.3 million pension pots considered lost by the survey, the average fund value was £9,470 – rising to £13,620 on average for those aged 55 to 75.

By consolidating multiple workplace and private pensions into fewer schemes – or even just one – you could make it easier to track and manage your retirement savings. Additionally, bringing multiple pots together may help you grow your funds more efficiently and reduce your administration fees.

Generally, you can consolidate any defined contribution (DC) schemes, regardless of whether they are workplace or private pensions. However, pension consolidation may not always be appropriate, with a variety of fees, rules, and the potential loss of benefits to consider.

Read on to discover three reasons why pension consolidation could boost your retirement income.

1. It’s often easier to manage your pensions and calculate whether you’re on track to achieve your goals.

By bringing your pension pots together under one provider with a single set of rules, features, and benefits, you may be able to simplify your pension management.

According to an August 2022 article from Standard Life, the average person in the UK changes jobs every five years. As a result, people often accumulate multiple workplace pensions throughout their working life – making it easy to lose track of them all over the years.

With fewer pension providers, policy details, and fund values to keep track of, you can reduce the administrative burden of managing multiple pensions. This helps you maintain a clear view of your total retirement funds, and monitor how well your investments are performing, while reducing the risk of losing money in forgotten pots.

With a greater understanding of the amount you currently have in your pensions, you can more easily determine how much you need to grow your funds by to achieve your retirement goals.

2. Your money could have higher growth potential if it’s all invested in one policy.

Generally, investment options vary from one pension to another. While some older pensions can be limited to investment funds managed by the provider, others could offer a wider choice and more flexibility for you to decide where your pension is invested.

Some schemes may perform better than others, delivering a higher rate of return on your pension savings. Additionally, having a larger pot may present more investment opportunities, with some requiring a minimum investment size.

Plus, since your investment returns compound over time, consolidating your pensions could enable them to grow more quickly.

Indeed, by moving more of your policies into a single pension that offers potentially higher returns, you could accelerate your pension’s growth. You might pay reduced fees.

When you have several pension pots, you could be unnecessarily paying duplicate fees. Each policy normally comes with an administrative charge that can range from less than 0.5% to more than 1% of your overall value.

While individual fees may sometimes appear nominal, the amount you’re charged is likely to grow as time passes and your fund value increases. Considering you could be paying such fees across multiple schemes and over several years, the total charges paid over your lifetime can be significantly more than if you had consolidated all your pensions into one pot and only had to pay one set of those charges.

However, some schemes may also charge an exit fee. For pensions set up before 31 March 2017, you could be charged up to 10% of your overall fund value if you decide to transfer your pension away. If you set up your scheme after this date, or are aged 55 or over, exit fees are capped at 1%, if they appear at all.

As a result, consolidating your pension pots can boost your retirement savings by reducing your costs. However, choosing which plans you consolidate, and where you consolidate them into can require careful consideration.

The benefits of pension consolidation depend on your circumstances.

Consolidation isn’t appropriate for everyone. In some cases, partial consolidation can be a good option, whereby you bring some of your policies together while leaving other pots separate. For some people, consolidation might not be necessary at all.

Smaller pension pots

If you have pots worth less than £10,000 and plan to withdraw from them before retirement, it could be worth leaving them separate from your other funds because of the “small pots exemption”.

As of 2025/26, you can draw down up to three of these pots in your lifetime without triggering the Money Purchase Annual Allowance (MPAA). This allowance permanently reduces the amount you can pay into your pension tax-efficiently from £60,000 to £10,000 a year.

Defined benefit schemes

If you have a defined benefit (DB) pension, consolidation is unlikely to be a sensible option. Unlike DC schemes, DB pensions generally offer a guaranteed retirement income based on your salary and years of service with your employer.

In fact, you are required to seek advice from a qualified financial adviser before transferring funds out of a DB scheme that contains over £30,000.

Your current workplace pension

If you and your employer are still contributing to a workplace pension, it may be worth keeping that scheme open. By closing it to consolidate with other policies, you could be surrendering your employer contributions, which may prove significant over time.

Protecting scheme benefits

In some cases, your pension schemes may offer valuable guarantees or benefits that are more common with older schemes, such as:

• Guaranteed annuity rates,

• The ability to access your funds before age 55,

• Flexible ways to take retirement or death benefits.

If it’s not possible to consolidate your other pensions into your preferred scheme, or by doing so you would lose valuable benefits – for example, if your employer is contributing to a different pot – it might be worth leaving your funds where they are.

It’s often worth seeking advice before consolidating.

While pension consolidation may deliver a range of administrative and financial benefits, creating a strategy for bringing multiple pots together can be complex.

There are a variety of rules, fees, benefits, investment opportunities, and personal factors to consider before consolidating. In fact, in September 2025 IFA Magazine reported that poorly informed pension transfers made in the year to 30 June 2025 may have cost pension savers £1.7 billion.

By seeking guidance from a qualified financial adviser, we can help determine the most effective consolidation strategy for your needs and circumstances. Get in touch to learn more about how we can support you in boosting your retirement funds.

---

Please note, this blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pensions Regulator.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

The Financial Conduct Authority does not regulate tax planning.