What’s the best way to combine my pension pots?

Have you got a pension, or lots of pension pots lying around collecting dust? Not sure if they’re growing, what the fees are, or even which pension company they’re with? You're not alone. We'll explain everything you need to know about combining pensions.

Combining pensions is where you bring multiple pensions together into a single pension pot, making it easier to manage, you won’t be able to forget about a pension pot (which happens a lot), and are able to make sure that it’s with a great pension provider (company) that suits you – such as one that’s easy to use, has low fees and great customer service.

With that in mind, if you’re looking for a new provider, one that can handle everything for you – meaning combine all your pension pots into one, handle all the paperwork that goes with it, and all for free, then here’s the best pension providers for you…

After that, we’ll run through everything you need to know about combining your pensions.

Best pension providers to combine pensions

The best way to combine your pension

Combining pensions can be super easy these days, and is very popular – often the recommended option for most people (we’ll cover all the benefits below).

Here’s the easy way to combine pensions in just 3 easy steps:

1. Pick a great new pension provider
2. Tell them where your pension is
3. They’ll handle the whole process, and your money arrives!

That really is it. Once you’ve decided on a great new pension provider, request a pension transfer, and they’ll handle everything for you – that’s getting in contact with your old pension provider, and handling all the paperwork involved with moving your pension across.

After a short while, normally a few weeks, but can be a few months, your money will appear in your new pension account, all ready to keep growing over time!

Plus, there’s normally no extra fees to do this.

As a reminder, check out PensionBee¹, it’s easy to use, low cost and a great track record of growing pensions over time (and you’ll get £50 added to your pension for free if you sign up with Nuts About Money).

There’s also Moneyfarm¹, which is great too, and can provide expert help if you’d like it.

For the full range of all the top pension companies, check out the best personal pensions.

These recommendations are where experts handle growing your money over time (so they sensibly make the investment decisions), it's called an expert-managed personal pension.

However, you can also make your own investments within a self-invested personal pension, or SIPP. This is only recommended if you know what you’re doing when it comes to investing, but if that sounds like something you’re interested in, check out the best SIPP providers.

Nuts About Money tip: if you’re not sure where your old pensions are, try the Government’s pension tracing service, or Gretel, a free service to find lost pensions.

What about my current workplace pension scheme?

You’ll likely have a pension with your current job, if you’re employed that is. This is called a workplace pension, and is all arranged by your employer, with money taken out of your salary and paid into your pension pot each month.

They’re pretty great because your employer has to pay in 3% of your salary per year, if you pay in 5%, so it’s like a free pay rise!

However, you don’t get to pick which pension provider to use, and often your employer won’t be picking a great one (as there’s not many out there).

You can transfer your old pension pots over to your current workplace pension if you want to, however once you’ve done that, there’s no going back, and you won’t be able to move it again to a new provider until you change jobs.

So, it’s often not a good idea to do this, as you could be stuck with a not so great pension provider, that could have high fees, and doesn't increase your pension in value over time.

By transferring your pensions to a personal pension, you have full control over which pension provider to use, so you can pick a great one, such as PensionBee¹ or Moneyfarm¹, and you’ll be able to transfer your pension again to another provider later if you decide to.

Note: if you’re self-employed, your only option is a personal pension, but it’s a great choice. Learn more with our guide to self-employed pensions.

Should I combine my pension?

Now, this is a good question, why should you actually combine your pensions? (Also called pension consolidation.)

Well, there’s a few reasons.

1. Never forget where they are

The first, is that you’ll know where all your retirement savings are – they’ll all be in one big (hopefully) pension pot, all ready and waiting for you to retire.

According to The Association of British Insurers, there’s over 1.6 million lost pension pots in the UK. That’s a lot. And, that totals over £19.4 billion. Yikes.

You don’t want your hard earned money to become part of that stat – and your pension provider might not get in touch with you when it comes to retire (they like to keep hold of them to keep charging their fee).

So, it’s a good idea to move old pensions over into a single pension pot where possible, so you can always remember where it is. Remember, depending on your age, this could be 40 or 50 years from now.

And, if you sadly pass away, your family (or whoever you want to get the pension) will only have to deal with one pension company to access your money. 

Note: your pension pot can be passed on completely tax-free if you pass away before 75 years old. It also won't count towards Inheritance Tax.

2. Keep up to date with pension growth

Do you know how much is in your pension right now? And, how much it’s grown over time? Didn’t think so, not many people do.

If all your pension pots are together, you’ll easily be able to check out how much your total pension pot is worth, and how much it’s grown over time. Meaning it will be easier to work out how much you need to save in future to give you the retirement income you’d like.

Nuts About Money tip: to learn more about how much you might need for retirement, check out our guide to how much you’ll need in your pension pot.

You’ll also know if it’s performing well, and know where it’s invested. And, if you don’t like where it is (like oil companies), you can transfer it to another provider whenever you want to.

3. Potentially save on fees

Did you know that you’re still paying fees on all your old pensions? Yep! They’re taken straight out of your pension pot every month – and sometimes these can be quite a lot, It all depends on the pension provider (company).

Some providers have pretty high fees, and others can be pretty low cost. So, combining your pensions can be a great way to make sure all of your pension pots are with a great low cost provider.

But there’s more, some of those great providers can also give you a bit of a discount if you have more saved with them – sometimes as much as 50% off their fee. Which means consolidating your pensions can mean even bigger savings!

The pension providers we recommend, PensionBee¹ and Moneyfarm¹, both reduce their fees after you save a certain amount.

4. Potentially grow your pension more

Finally, with a great pension provider, your pension pot might also grow much bigger over time! 

When you save into a pension, it’s typically pooled together with other people’s money, into something called a pension fund, also called a pension plan, which is managed by experts who aim to grow it significantly over time.

All pension funds are different, and with some providers, you’ll get to choose which pension plan you want to invest in.

Some pension plans are designed to grow a bit slower, and some are designed to grow faster (but with bigger ups and downs along the way). So, reviewing where your pension pots are and which pension fund your money is in, might give you a few surprises – your money might not be growing at all, or it could be in completely the wrong pension plan for you (which can be based on things like your age).

So, combining all your pensions together means you have full control over where your money is invested, allowing you to pick a provider with a great track record of growing pensions over time, and a pension plan that suits your personal circumstances (e.g. your age).

Nuts About Money tip: don’t panic about your money being invested – it’s the best way of growing your money over time, and almost every pension is invested (whether you know it or not). Your pension will go up and down in value, but the experts know what they’re doing, and over time your money should grow very large (also, try and contribute as much as you can afford each month too, it will soon add up and your future self will thank you).

You can keep paying into your new pension

Once you combine your pensions, you can still pay into your new pension – and it’s often a great idea to do this (ideally monthly), so you can keep building up a nice big pension pot, all ready for retirement.

These days, you’ll need a fairly hefty pension pot in order to retire with a comfortable income…

Here’s how much you’ll likely need in your private pensions (e.g. your pension from work and your own pension you set up), and this includes receiving the State Pension:

Note: the State Pension is the pension you’ll get from the Government when you reach State Retirement age (currently 66), and only if you’ve paid at least 10 years worth of National Insurance contributions (but 35 years for the full amount). It’s also not a lot, just £10,600 per year currently, so you’ll likely need a big private pension too.

‍Nuts About Money tip: learn more with our guide to how much you’ll need in your pension pot.

If you’ve got a pension from your current work, great, often with most workplace pension schemes, if you pay in 5% of your salary per year, your company has to pay in 3% too.

So, a great way to build your pension is to pay 5% into your workplace pension, and then pay into your personal pension if you can after that – that way you get to pick which pension provider you want to use – for instance, the pension you’ll soon set up to combine all of your other pensions.

A word about defined benefit pensions

When we’re talking about combining and consolidating your pension(s), we’re talking about ‘defined contribution’ pensions – they’re pensions that you pay into yourself (either from your work, or directly yourself), and it grows into a (hopefully) big pension pot with a financial value (e.g. a £200,000 pension pot).

You can then decide when to take your money out, as long as you’re over 55, and you can decide to transfer them to another provider pretty much whenever you like (as long as it’s not your current workplace pension).

With a ‘defined benefit’ pension scheme, which are more common in government jobs, and the NHS, instead of building up a pension pot, you’ll typically get a retirement income after you retire.

This can be based on things like how long you’ve worked there, and what your salary was. These can also be called a final salary pension (not common these days), or an average salary pension.

They’ve got pretty good benefits (such as the guaranteed income), so it's often not a good idea to combine or transfer these to a defined contribution pension. If you are thinking of doing this, it’s a good idea to speak to a financial advisor first – you can find great ones local to you with Unbiased¹.

Exit fees

Often when combining your pension pots, there won’t be any fees, however if your pension is pretty old, and not with a nice pension provider, there might be some fees for them to transfer it to your new provider, called exit fees.

Your new provider will let you know if there are any fees as part of the transfer process, and you can decide to either not transfer the pension, or continue with the transfer. It can be a good idea to simply pay the fee so your money is with a great new provider, where it can potentially grow more and with lower fees (and all in one place), but the choice is yours.

Note: the fees aren’t typically too much, and by law they have to be capped at a maximum of 1% if you’re over 55 years old.

Modern pension providers won’t have any fees, so any pension you’ve had in the last 10 years or so (or even longer) likely won’t have any exit fees.

Is pension consolidation safe?

Yep! It’s perfectly safe to consolidate your pension savings.

Your new provider will handle everything for you, and your old provider will send your pension pot directly to them, and it will arrive in your new pension.

Pensions, and all financial services, are regulated by the Financial Conduct Authority (FCA), that means every pension provider has to be reviewed and approved in order to look after your money.

You can check if a pension provider is authorised by the FCA by checking the FCA register.

That also means you’re protected by the Financial Services Compensation Scheme (FSCS), which can give you compensation up to £85,000 should anything happen to your pension provider (such as going out of business).

However, your money is actually within the pension fund itself, which is held by very large banks, all in your name, and can only be returned to you. Overall pensions are super safe.

Let’s recap

And there we have it. The best way to combine pensions. Pretty simple really isn’t it?

All you need to do is find a great new pension provider, and let them know you want to transfer your old pension(s) across to them. They’ll then get to work and handle everything for you. It’s that simple.

There’s typically no fees to combine your pensions, and after a few weeks (or sometimes months), the money will turn up in your new pension pot, so you’ll never forget where your pensions are, and can keep growing over time, all ready for a nice retirement (fingers crossed).

As a recap, our top recommendation for a great pension provider is PensionBee¹, it’s easy to use, low cost and has a great track record of growing pensions over time – and you’ll get a dedicated account manager to help whenever you need it.

There’s also Moneyfarm¹, who can provide expert advice too, and for the full range of options, check out the best pension providers.

Now all that’s left to do is enjoy retirement!