According to an article by Pensions Age, research carried out in 2025 revealed that 83% of Britons don’t know how much they pay in charges for their pensions. This means millions of people across the UK could be paying significantly more than they need to their pension provider.
If you’re one of them, there may be a way you could reduce the fees you pay, which is to merge your pension pots into one. Bringing your pension pots together into one scheme could provide more competitive rates, meaning your retirement fund with higher levels of growth potential.
Read on to discover three powerful questions you probably need to ask yourself if you’re considering merging your pensions. Furthermore, find out why you should always take care before deciding whether to consolidate or not.
How could reducing my charges increase my pension’s growth potential?
If you have a pension scheme with higher charges, the long-term impact on your retirement lifestyle might be more severe than you think. As the growth potential of your retirement fund could be materially reduced after charges, the value of your pension pot may be lower than you would want when you reach retirement.
Consequently, the income you receive from your pension pot could also be reduced, which may mean you can’t maintain your desired standard of living in retirement. Worse still, it could mean your pension pot runs out earlier than expected, which could put your financial security at risk.
Merging your pensions and placing them into one scheme could help to reduce the charges you’re paying, which in turn may expose your retirement fund to greater growth potential. As a result, you might have a higher level of income in retirement, meaning you can potentially afford the standard of living you want.
That said, you should never assume that merging your pensions will automatically reduce costs as you may already be in a pension with very competitive fees. This is why you should always speak to a financial adviser before consolidating your pensions, as they will clarify the costs associated with your scheme.
Furthermore, some cheaper pension schemes could expose your money to significantly lower levels of growth potential, which may mean you’re worse off over the long term. A financial adviser will be able to confirm this and help you to understand your options.
How does consolidating ensure my pension’s exposed to the right level of risk?
Broadly speaking, when you started your pension one of two things would have happened:
your contributions were put into a ‘default fund’ by the pension provider,
you chose a fund that was exposed to a level of risk you were happy with at the time.
If it’s the later, in the years that have passed, however the level of risk that is suitable for you could have changed. This may because your circumstances have changed, or you’re approaching your retirement age.
If your pension went into a ‘default fund’, its exposure to risk could have remained the same meaning that it’s now too high for your situation. This means your money’s exposure to a potential loss is too high and could jeopardise your future financial security.
The other side of the risk coin is that your money may be in a fund that is too low risk, meaning it’s not exposed to enough growth potential. This again may put your financial security at risk, as the value of your pension pot may be too low to support your retirement lifestyle.
This is why the consolidation process should include a conversation with a financial adviser to assess the correct level of risk for you. Doing so means your pension will be exposed to an appropriate level of risk for your circumstances, which exposes your pension to as much growth potential as possible at level of risk you’re comfortable with (or suitably able to adopt).
Why is a single pension pot be easier to manage?
Keeping track of many different pension pots can be time-consuming and complicated, especially if you’re trying to deal with the jargon associated with the retirement accounts. If you would like to demystify 10 commonly used pieces of jargon associated with pensions, please read our easy-to-understand blog.
Besides the jargon, there is also a myriad of pension regulations and thresholds that can make dealing with several pots feel overwhelming and could lead to a decision you later regret. Choosing to merge your pensions may make it easier to manage and track your pension, as you’ll have less funds to monitor and deal with.
In addition to this, working with a financial adviser also means they can also monitor whether your retirement plan is on track, and let you know if it’s not. More importantly perhaps, a financial adviser can help you understand how best to get your pension pot back on track, so that you can enjoy the lifestyle you want when you stop working.
How can AFH Wealth Management help me?
Please remember, combining your pensions can be time-consuming and complex, and without professional advice, may result in a decision you later regret. For example, your existing pension has valuable guarantees you probably wouldn’t want to lose, such as a tax-free lump sum greater than the typical 25% or a guaranteed annuity rate.
Always remember to speak to a financial professional before taking – or refraining from – making any financial decision. All investment carries risk and returns are not guaranteed.
As one of the UK’s leading financial advice companies, we can provide a clear explanation of the type of pension you have, its charges, the levels of growth it’s enjoyed and whether consolidation is right for you.
If you would like to discuss whether consolidation is right for you, please call us on 0333 010 0008 or contact us to arrange a no obligation initial meeting with one of our independent financial advisers.
Can AFH help if I’ve ‘lost’ previous pensions?
One reason many people don’t consolidate their pensions is because they have lost or forgotten them. If you have lost pensions, you could use the Government’s tracing service to find them.
Alternatively, you can work with a financial adviser who can help you find them, then explain your options. If we can help you to locate lost pensions, please call us using the above contact details.