UK Pension Consolidation

completing the retirement puzzle

Combining UK pension plans into one pot

It’s rare for someone to work for the same employer throughout their career. With job and location movements you’ve probably collected a variety of UK pension plans.

UK pensions can differ across a number of key areas, including:

  • Death benefits
  • Income security
  • Investment portfolio
  • Member control
  • Retirement age
  • At-retirement options
  • Income flexibility
  • Exposure to the lifetime allowance
  • Lump sum entitlement
  • Ad-hoc withdrawal options

By combining your UK pensions into one account, such as the SIPP, your funds can be streamlined and well prepared for retirement.

What to look out for before consolidating your pensions

Before making any changes to your UK pensions, review your pensions to assess how each individual plan works. It may sound nice to have just one pension ready for retirement, but for some it is advantageous to keep one or two in place due to their inherent and valuable benefits. Even the smallest pension pots can be best kept as they are.

For example, we’ve reviewed pensions holding up to 95% of ‘protected tax free cash’. This sort of pension benefit is specific to the scheme, and would be lost if funds were transferred away. While in this experience, the client’s pension pot was modest, being able to withdraw 95% of it as a tax free lump sum upon retirement provided a foundation for that client’s holistic retirement plan.

Pension consolidation in practice

Consolidating UK pensions can be a quick and easy process. Most personal pensions or defined contribution plans can be switched within a matter of weeks.

Defined benefit pension consolidation or those with safeguarded pension assets (i.e. protections, due bonuses or guarantees) will take longer. We’ve discussed the DB pension transfer process in another blog article.  Defined benefit transfers require a UK pension transfer specialist. In some cases, smaller DB plans are retained as an income ‘backbone’, while other pension pots can be used for flexibility.

Streamline your retirement planning

By consolidating funds into one plan, you are simply choosing one pension administrator, or trustee. This doesn’t mean you’re investing all your eggs in one basket!

UK pensions are protected under regulation, and only offer investment funds to ‘retail’ (i.e. not professional) investors which are also regulated and properly managed. Within a SIPP, you can diversify your investment strategy and log into your pension plan online, viewing the breakdown of your pension holdings much like online banking.

The advantages of SIPPs for pension consolidation

One modern UK pension plan such as the SIPP is much easier to manage and keep an eye on. When you reach the point of taking retirement income in particular, it is preferential to generate income from one source. This allows a smoother retirement plan and easier personal administration.

Under the bonnet of a private pension, such as the SIPP, there are thousands of investment opportunities. Within the SIPP you can hold multiple cash accounts, currencies, investment funds, direct equities and even commercial property.

The purpose of the SIPP for consolidation is to streamline your planning, while offering an array of investment opportunities, while being ‘fully functional’ for flexible retirement withdrawals.

Find out more about your pension options with our range of free pension planning guides.


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