Consolidating Frozen Pensions Into One Scheme


Where pensions are concerned ignorance is not bliss. Over a working lifetime, several frozen (paid up) pensions may be accumulated. Failure to check those pensions regularly and take any appropriate action could knock thousands of pounds off the value of a pension fund at retirement. Consolidating frozen pensions into one scheme is one of several options that are often worth consideration.

Analysis of your frozen pensions should at least deliver an understanding of growth rates and charges. You may decide on no action. You may decide to change the level of your contributions. Or you may decide that a pension transfer to a different scheme and/or consolidating several frozen pensions is the best way forward for you.

Why Should You Consolidate Frozen Pensions

It should not be assumed a frozen pension is under-performing but it is important to check. We have defined an underperforming pension elsewhere on this blog.

If a pension pot is not performing at or above the industry average then it is important to consider alternatives. Fees are the other key issue to check. Older pension schemes can have significant annual charges that may impact on the value of a pension fund over time.

Finally, consolidating frozen pensions into one fund can save time and trouble when trying to monitor pension fund performance over time. But combining frozen pensions is not the right way forward for everyone. It could leave you worse off if you do not consider the issues outlined below.

Key Issues To Consider

Before consolidating frozen pensions, it is vital to consider both your personal circumstances and the terms and conditions of each pension. Some older pension schemes offered valuable benefits such as a guaranteed annuity rate or a higher than average tax free sum.

To close and move such pensions could leave you worse off in retirement. If you do decide it would be best to move a pension it is important to check the exit fee. Some older pension schemes can charge 10-20% of the fund value if the fund is transferred or taken before the designated retirement age. Even if the pension fund is moved to one with lower annual fees and higher growth it may be impossible to recover in the time available.

Of course, the potential new pension scheme must be carefully evaluated. It is important to assess all fees (some may not be immediately obvious) to check that the scheme does actually deliver better value. A new scheme may have minimum contribution requirements that do not fit with personal circumstances. There may also be minimum initial investment requirements.

It is vitally important to be aware of Scams. If an offer seems too good to be true it almost certainly is. Be careful whatever scheme is chosen is regulated and be very wary of any offer that seems exotic or unusual in any way.

When To Consolidate Pensions

Ideally, a decision should be made to consolidate frozen pensions (or not) 10 to 15 years from retirement. It is probable there will be some costs associated with the move. If close to retirement there may not be the time for the new pension fund to grow sufficiently to cover those costs.

What Is Involved In The Consolidation Process

The first step is to evaluate your pension documentation to check a move is the best way forward (see above). This assumes the appropriate documentation has not been mislaid over the years. It is also possible there may be a pension that has been completely forgotten. To trace lost pensions or find the details of pension providers there are various free services available. Missing information can be requested from the pension provider.

Assuming the pension scheme will allow the transfer, any associated fees are acceptable and a thorough review of relevant paperwork and personal circumstances suggests a frozen pension transfer may be the best way forward the first step is to request a transfer valuation from the pension provider.

This process should be repeated for each frozen pension to be transferred. The next step is to choose a new pension scheme to accept a transfer. Self Invested Personal Pensions (SIPP’s) are a popular choice but they are not the only option. We have written about transferring a frozen pension to a SIPP elsewhere on this blog.

It is important to consider the reputation of the new pension provider, their service levels, how involved you wish to be in choosing your investments, the mix of investments (asset classes) available and (crucially) their fees.

A significant amount of form filling and liaison with each existing pension provider should be expected. The process can be frustratingly slow and time consuming. As an alternative, there are services that will perform the administration tasks if the investment is placed with them.

Or a Financial Adviser may be employed to advise on the wisdom (or otherwise) of consolidating frozen pensions. They can also advise on the best receiving pension scheme for the funds and look after all administration tasks.

Download our free frozen pension guide to learn more. To ask a question (no cost or obligation) simply complete the contact box below and one of our advisers will Email an answer.

Visit our Frozen pension advice process page to learn more about how we work or call us on 0800 043 8341


This blog is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investment or course of action. Tax regulations can change and any figures quoted above are at the date of publication.