3 reasons to speak to your financial planner before consolidating your pensions 

You might have built up several pension pots over your career, especially if you’ve changed jobs or taken breaks to care for family or pursue other interests.

Unfortunately, multiple pots can make it harder to track what you have and how it’s invested, which could result in unnecessary fees and ‘lost’ pension funds. According to Pensions UK, there is £3.1 billion sitting in unclaimed pension pots in the UK.

On 15 September, Professional Pensions reported that the Department for Work and Pensions (DWP) has launched a consultation on how to tackle fragmented ‘small pots’. This follows the Pensions Schemes Act 2026, which gave the government the power to introduce a system that would allow for automatic consolidation, initially targeting dormant pots worth £1,000 or less.

However, this is not expected to take effect until at least 2030. Moreover, consolidation is likely to remain voluntary for larger pots, leaving responsibility for these complicated – and often irreversible – decisions with the individual. This may be a daunting prospect for many people.

Research by Aviva shows that while 74% of people consider consolidating their pensions, only 30% proceed to do so, often because they fear making mistakes or losing money.

Indeed, while combining pensions could simplify retirement planning, it isn’t always the right move.

That’s why seeking financial advice is crucial.

Read on to discover three ways your financial planner can help you make an informed decision about whether or not to combine your pensions.

1. Identify benefits and guarantees you could lose through consolidation

Some pensions come with valuable benefits that might be lost if you transfer funds to a different scheme.

For example, defined benefit (DB) or ‘final salary’ pensions provide a guaranteed income for life, often with inflation‑linking and other benefits that would be hard to replace.

Other pensions – typically older schemes – may include guaranteed annuity rates (GARs) that deliver a higher retirement income than today’s market rates or protected tax‑free cash entitlements.

Your financial planner can help you understand the value of the benefits linked to your pensions. They can then use cashflow modelling to show how consolidating them or keeping them separate might affect your long-term finances.

2. Review exit fees and employer contributions

Moving money out of older pensions could trigger exit penalties. Historically, these fees reached up to 10% in some cases.

However, the Financial Conduct Authority (FCA) introduced a cap on early exit charges from 31 March 2017 for personal pensions and from 1 October 2017 for occupational defined‑contribution schemes. This limits charges to a maximum of 1% for members aged 55 or over. The FCA also imposed a complete ban on charging exit fees on pensions set up on or after 31 March 2017.

With‑profits funds can also apply a market value reduction (MVR) when you remove funds early. An MVR lowers the transfer value of your pension funds.

At the same time, moving away from a current employer scheme usually stops future employer contributions, which can be a significant loss over time.

Your financial planner can check the terms of your pension schemes and help you decide whether to transfer funds, leave your pots as they are, or consolidate strategically.

3. Understand the tax implications

Consolidating pensions could have tax implications that affect your long‑term finances.

One example of this is the ‘small pots exemption’. Starting to draw flexible income from a pension usually reduces the amount you can still contribute with tax relief each year. However, this exemption allows you to cash in up to three personal pension pots worth £10,000 or less (and any number of workplace pots under that limit) without triggering this reduction.

However, if you consolidate everything into one larger pot which exceeds the £10,000 threshold, you lose the ability to use the small pots exemption and may unintentionally limit future tax‑efficient saving.

Your financial planner can help you understand and navigate the tax rules relating to pensions, which are complex and constantly evolving. For example, from 6 April 2027, most unused pension funds and pension death benefits will be brought into the value of your estate for inheritance tax (IHT) purposes, ending the long‑standing IHT exemption.

Your financial planner can help you stay on top of these changes and structure your pensions in a tax‑efficient way that aligns with your retirement and estate planning goals.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, cashflow planning or tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pensions Regulator.