According to Pensions Age, 83% of Britons who are paying into a pension have no idea how much they are being charged by the provider. This means millions of workers across the UK could be paying significantly more than they need to for their retirement plan.
If you’re one of them, you may be able to reduce the charges you’re paying by ‘consolidating’ your pension schemes. This is where you merge several schemes and place it into a single policy, which could help to reduce the overall fees you’re paying.
That said, reducing the amount you pay in charges might not be the only reason to consider consolidation. As part of Pension Awareness Week, read on to discover three powerful reasons you might want to consolidate your pensions, and why it’s essential to talk to a financial adviser before going ahead.
It could boost your pension’s growth potential
The long-term impact of higher fees on your retirement lifestyle could be more severe than you think. This is because the growth potential of your retirement fund could be significantly lowered after charges, which in turn, could reduce the amount of income you can take from your retirement fund.
By merging your pensions and reducing the overall amount you pay in charges, you may be able to expose your retirement fund to greater potential growth. This could provide a higher level of income in retirement and a better standard of living when you stop working.
That said, you should never assume that merging your pensions will automatically reduce costs, as you may already be in a pension with lower charges. For this reason, you should always speak to a financial adviser before consolidating your pensions, as they will clarify the costs associated with them.
It’s also important to remember that a pension scheme with reduced fees may expose your money to much lower levels of potential growth. As such, you might be better off staying with your current provider.
A financial adviser will confirm whether this is the case and help you to understand the best option for you.
Ensure your pension is exposed to the right level of risk
Broadly speaking, when you opened your pension one of two things would have happened:
- your contributions were put into the pension provider’s ‘default fund’, which would have been at an agreed level of risk
- you opted for a specific fund that was exposed to a level of risk you were happy with at the time.
In the years that have passed however, the level of risk that is suitable for you may have changed. This could be because your circumstances are now different, or because you are now approaching your target retirement age.
If your pension’s exposure to risk has remained the same however, your exposure to a potential loss could be too high. Alternatively, your money may be in a fund that is too low risk, meaning it’s not exposed to enough growth potential.
Either of these could be detrimental to your financial security in retirement. However, as a key part of pension consolidation is to assess your attitude to risk, it could ensure your pension is exposed to the right level of risk for you.
This could provide you with peace of mind that your retirement fund is exposed to as much growth potential as possible, while having a level of risk you’re comfortable with.
Having fewer pensions makes them easier to manage
Keeping track of many different pensions can be time-consuming and complicated. Choosing to merge your pensions may make them easier to manage as you’ll have less funds to monitor.
As such, it will be easier to keep an eye on your pensions, and ensure they’re on track to provide the retirement lifestyle you’re aiming for. If they’re not, it will be easier to spot, so that you can take action as early as possible to get them back to where they need to be.
Get in touch
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 scheme may have guarantees that you’d probably want to keep, such as a tax-free lump sum that’s greater than the usual 25%.
As one of the UK’s leading financial advice companies, we can provide a clear explanation of your pension’s charges, the level of growth it’s enjoyed and whether consolidation is right for you.
If you would like to discuss this further, please call us on 0333 010 0008 and we’d be happy to arrange a no obligation initial meeting with one of our independent financial advisers.
16 September 2025