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Should You Consolidate Your Pensions?

Will Bale • 8 August 2025

On average, people in the UK will now have 11 different jobs during their working life. This often results in many of us having several pension plans with different employers and providers, which can be difficult to keep track of.  

Pension Auto-Enrolment, which was introduced in 2012, made it compulsory for employers to a) opt their employees into a pension scheme, and b) assist them by contributing towards their retirement. As a result, more people are now saving into a pension and taking care of their future selves, which of course is great news.  

However, those pension pots can be many and disparate. If your pots are scattered, you may not know exactly how much you’ve built up or whether you’re likely to be able to draw the income you require and live the lifestyle you want in retirement. 

What is pension consolidation?

So, what does pension consolidation mean? To put it simply, this is an exercise whereby you bring all of your pensions together. This can be done by merging two or more of your existing polices into the same plan or it may be better for you to collate these in a new plan altogether.

The potential benefits of consolidating pensions

A pension consolidation exercise could offer you with a more individually tailored investment and retirement strategy aligned to your retirement goals and could also lead to you getting more flexibility in the way you access your pension funds. 

Let’s dig a little deeper into each of the key benefits: 

Simplicity

There’s no doubt that having all your pensions in one place creates simplicity – only one account to keep track of and one set of annual statements to deal with.

The simplicity of this approach can also make it easier for you to manage your pension, since you would be able to align your full retirement savings into one investment strategy.

On the surface it seems as though having multiple pots could be beneficial for diversifying your approach; however, if you’re not closely tuned in to the strategies behind them, you may find that the differing approaches are inadvertently disagreeing with each other or being counterproductive rather than working in tandem to achieve the growth you require.

Focused on your goals

Consolidation means that you can combine your funds into a single, focused, bespoke investment strategy, planned around a retirement age and target income that meets your personal objectives.

Default, off-the-shelf pension arrangements are often invested into a ‘lifestyle’ fund, which means that it works to the target of generating enough to purchase an annuity once you hit a certain age (usually they default to 65). However, for many people an annuity may not be the best option for helping to achieve their retirement goals, meaning that the fund is simply not engineered with your own circumstances and life goals in mind.

Greater choice of funds

Some pension plans may only allow you to invest in a small range of funds or portfolios, which often are not customisable beyond the vague categories of ‘growth’ or ‘cautious’, for example.  

This could mean that you are invested into a strategy which may not match your attitude to risk or investment timelines. We tend to find that many pension providers default to a level of risk which is higher than necessary for the intended purpose. 

Streamlined income drawdown strategy

When the time comes to draw an income from your pension, working with a single pension pot simplifies and streamlines the process significantly.

If you were to draw income from several pension schemes – all arriving on different dates in the month – this could have a direct impact on your tax code, which can be a headache to sort out with HMRC to avoid paying too much tax.

Flexible drawdown is a powerful tool, which is not always available in employment related pension schemes. Drawing your income in this way allows you to vary the amounts as required, which can give you greater freedom and control when it comes to income and tax planning.

Reasons not to consolidate your pensions

Pension consolidation certainly has its advantages, but it may not be appropriate or necessary for everyone. There are a few circumstances in which doing so may not be in your best interests. Among these are:

You are still contributing to your pension

If you’re an active member of a workplace pension scheme, it is generally not in your best interests to transfer. Employer contributions are a valuable benefit and not something that can be replicated elsewhere. Some employers may also be paying some of your administration costs whilst you remain a member of their pension scheme.

A consolidation may increase your ongoing costs

Transferring your pension into another arrangement may involve increased costs. These costs could come in the form of:

  • Exit penalties for transferring your pension away from a provider;
  • If the arrangement charges you to sell your assets;
  • If the receiving provider charges for incoming transfers.

As there are many pension providers in the market, some arrangements may cost more than others, and this is worth considering as the same needs could be met for lower charges.

You plan to simply buy an annuity at retirement

We don’t generally recommend annuities at Tideway. In our opinion, in most cases they won’t give you the best value for money. However, everybody’s goals and circumstances are different, and we recognise that for some people an annuity will be the right option.  

If you like the idea of a regular fixed income in retirement, then staying in a lifestyle fund or pension arrangement that gives you beneficial annuity rates would be more suitable for your circumstances rather than transferring to another pension arrangement altogether.   

Important things to consider

The decision to consolidate your pensions should be taken within the overall context of your financial plan, taking into account your personal circumstances, retirement goals, intentions for legacy, tolerance for risk, and much more.

At Tideway, we take a robust approach when assessing whether it would be beneficial to recommend pension consolidation to a client. Here are some of the factors we consider in the decision-making process:

What type of pension arrangement is it?

Defined Benefit (DB) pensions, such as final salary pension and career average revalued earnings (CARE) schemes, provide valuable guarantees such as a level of secure income in retirement, normally linked to inflation. Whilst these types of plans are less common nowadays, they are complex and require specialist financial advice if you are considering a transfer away from this arrangement. Tideway is authorised to advise on DB transfers and in the past has been a specialist in this area.

Defined Contribution Pensions (DC) may include a protected retirement age, or an enhanced tax-free cash figure. Some other schemes may also offer guaranteed growth or annuity rates, which would likely be lost on transfer to another provider.

The costs involved

As part of Tideway’s analysis, we would consider whether there are any added costs involved in transferring pension arrangements (as illustrated above).

Uniquely, Tideway does not generally charge any initial fees or exit fees – it is part of our service offering. However other financial advisers may charge you for this advice, so if you go elsewhere, please make sure you look out for this – they can often be hidden costs that take a sizeable bite out of your funds.

The value of the pension

Some pension schemes may offer you the chance to take a lump sum payment if a pension fund is under £10,000. Whilst you will pay income tax on 75% of this value, you may be able to avoid using some of your lump sum allowance (LSA) in taking the pot as a lump sum under the “small pot” rules. This would therefore negate the idea of transferring the pension.

Pension legislation can be changed by a future government so we would encourage you to take financial advice if you are unsure of the impacts.

Could Tideway help me consolidate my pension?

As we’ve touched on, pension consolidation may not be appropriate for everyone. Each case should be assessed individually by a regulated financial adviser in line with your overall financial plan and retirement strategy, to ensure that you are getting the most beneficial outcome for your personal needs.

Tideway have helped many people through this exercise over the years. We specialise in pension and retirement planning, with a particular innovative streak around managing pension drawdown in a smart, sensible, and tax-efficient manner.

Our range of carefully selected investment portfolios are designed to:

  • achieve robust growth whilst taking as little risk as possible, and
  • produce a sustainable income for you in retirement utilising your irreplaceable capital.

Our Wealth Managers work closely with clients to design a bespoke plan that fits their unique needs, pulling from a wide range of tax-efficient products and investment wrappers, whilst our Investment Management Team works proactively behind the scenes to keep our model portfolios performing at their best.

Effectively, when you work with Tideway you are benefitting from two valuable services in one.

Give us a call

We don’t charge any fees for our initial advice.  

If you would like to learn more about how pension consolidation could benefit you personally, or if you’d like to have a chat to one of our Wealth Managers about your own situation, we would be more than happy to help.  

Either fill out the contact form below or give us a call directly on 020 3143 6100. 

Risk Warnings:

The content of this document is for information purposes only and should not be construed as financial advice.

Please be aware that the value of investments, and the income you may receive from them, cannot be guaranteed and may fall as well as rise.

We always recommend that you seek professional regulated financial advice before investing.

Any references to tax and allowances are correct at the time of writing, but they may be subject to change in the future.

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