0330 223 1113 info@infinityfinancialadvice.co.uk

3 reasons why pension consolidation could boost your retirement income

January 31, 2026

Category: News

Increasingly, UK savers are losing track of their pensions. In October 2024, research by Pensions UK found that 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, the average fund value is £9,470 – rising to £13,620 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, and when consolidation might not be appropriate.

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

By bringing more of 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 study 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 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 how much you currently have, you can more easily determine how much you need to grow your funds to achieve your retirement goals.

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

Generally, investment options vary from one pension to another. While some older pensions may 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 funds into a pension that offers potentially higher returns, you could accelerate your pension’s growth. According to HM Treasury in May 2025, the average earner could boost their retirement savings by £6,000 through consolidating their funds.

3. You might pay reduced fees

When you have several pension pots, you could unnecessarily pay duplicate fees. Each scheme generally comes with varying administrative charges, ranging from less than 0.5% to more than 1% of your fund. Typically, older pensions are likely to have higher fees.

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 significant.

However, some schemes may also charge an exit fee.

As a result, consolidating your pension pots can boost your retirement savings by reducing your costs. However, choosing which plan to transfer your funds into requires 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 funds 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 generally 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 will be 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 funds, you’ll likely surrender 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, although this is rare
  • Flexible ways to take retirement or death benefits.

If it’s not possible to consolidate your other pensions into your preferred scheme – 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 savers £1.7 billion.

By seeking guidance from a qualified financial planner, you could 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.

HM Revenue and Customs’ practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

Workplace pensions are regulated by The Pensions Regulator.

The Financial Conduct Authority does not regulate tax planning.

Pension consolidation advice is available. If you hold a Defined Benefit Pension Scheme or Defined Contribution pension with a guaranteed minimum pension or income, any advice you receive will be through a dedicated referral advice service and a specialist within our network.

Approved by The Openwork Partnership on 16/10/2025.

Fancy a chat? How about a cuppa?

Ask us a question and take your first steps on the journey towards achieving your homebuying or financial goals.

    Please tick how you would like us to contact you.