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Bringing together the pensions you have built up over your working lifetime isn’t as simple as going to the shops and buying a loaf of bread. So long as you do it right, though, it’s potentially much more lucrative.

A little effort can go a long way. So don’t let inertia get in the way.

But before we explain how you do it, let’s first consider why you might want to do it: the extra money that consolidating your pensions could potentially put in your pocket to help counter the rising cost of living.  

To illustrate these potential savings, we ran through a few numbers to see how long it might take to gain an extra year’s retirement income by simply shifting various pension pots totalling £250,000 to a low-cost provider like Vanguard.

For simplicity’s sake, the money was assumed to be invested in the same low-cost multi-asset fund, with the same transaction costs and earning the same 4% annual net return. It was also assumed that the retiree withdrew 4% of the total each year as income1.

What we found is that compared with the UK’s highest-cost pension provider, the saving with Vanguard after 10 years would be £3,975.

Even at today’s elevated prices, that’s two years of free electricity and gas for the average UK household2 – or, if you prefer, between 10 to 20 years of free food or insurance for your pet cat or dog3.

How you spend the saving is up to you.

That’s the potential benefit of transferring your pensions to a low-cost SIPP provider like Vanguard, which charges just 0.15% a year, capped at £375 per year.

Improved focus

The savings you could potentially make will vary depending on the size and cost of the various pension pots transferred and the return assumptions made. The above example is just a taster of what may be possible.

And it’s not the only potential benefit because consolidating your different pensions can also give you greater visibility over your retirement finances. After all, survey data suggests as many as one in nine people in the UK change jobs each year4 and that we might, on average, have 11-12 jobs over the course of our careers.

That’s a lot of pensions potentially picked up along the way – and more so given automatic enrollment started becoming mandatory in 2012 – which can make it harder to know where exactly you are.

Bringing your pension investments together under one roof can give you a greater sense of control – whether you’re still building up your retirement finances or are already relying on them for income.

For example, it can help you to identify (and maybe plug) funding shortfalls by focusing the mind on whether you’re on course to retire when you want to and/or with the income you would like. It can also help you to plan and budget more effectively when you are retired and ensure you avoid expensive mistakes. This includes, potentially, withdrawing too much money too quickly, incurring a higher tax bill that could have been avoided5 or accidentally triggering a change in your status with HMRC and reducing the amount you can save6.

By giving you greater clarity over your finances, it can induce better behaviours too including a more disciplined approach to saving and investing and more sustainable rates of withdrawal.

How it’s done

And don’t think you have to consolidate all your pensions in one go. With a Vanguard SIPP, for example, there are no transfer or exit fees and no minimum transfer value. So there’s nothing to stop you doing it in stages – one at a time – or even as you change jobs, much like changing utility bills when you move house.

There’s the inevitable form-filling, true, although not as much as you might imagine7.

And you may also have to wait a bit for your pension transfers to complete. We estimate that it can take up to 10 weeks when transferring to a Vanguard self-invested personal pension (SIPP). But sometimes it can take longer, depending on the pension provider you are transferring from.

You may need to do some homework as well. For example, older types of workplace pension, namely ‘final salary’ or ‘defined benefit’ (DB) schemes, are usually best left alone since the income they provide are theoretically guaranteed for life. The process for transferring a DB pension is also slightly more complicated8 than for ‘defined contributions’ (DC) schemes, which most workplace pensions are these days, including SIPPs.

The government-backed MoneyHelper website has a handy tool for checking the type of pensions you already hold.

In addition, find out if your pensions have exit fees or protected benefits. If in doubt, consult an adviser who may be able to check this for you, albeit at a cost. But if you are confident enough to do this yourself, just ask your pension providers directly before initiating any transfer.

And if you have lost track off the odd workplace scheme, don’t worry – the government’s Pension Tracing Service can help. After all, many of us change jobs often over the course of our careers, so you won’t be alone.

Now you’ve read all that, ask yourself this: what’s a couple of hours’ work spread over a few months if it means more money in your pocket in the decades ahead – potentially a lot more money?



1 We also assumed the money is invested in a Vanguard Target Retirement fund with an ongoing fee charge of 0.24% and assumed additional transactional costs of 0.04%.

2 As cited in ‘British households face record 54% energy bill rise as price cap is raised’, The Guardian, 3 February 2022.

3 What is the average cost of owning a pet? MoneyHelper, 1 September 2021.

4 Analysis of job changers and stayers, April 2019, Office for National Statistics.

5 25% can be withdrawn tax-free from each defined contribution pension scheme – not the totality of your DC pension holdings. Withdrawals are treated as income and taxable as such once this threshold is crossed, subject to your annual personal allowance.

6 Withdrawing anything more than your tax-free entitlement from any of your pension pots can also trigger a Money Purchase Annual Allowance, which will reduce the maximum amount you can subsequently save each year in your pension to £4,000 from £40,000.

7 For example, in the case of pension providers who need to see signed paperwork before they agree to a transfer, Vanguard can save you some time by providing a pre-filled form you can print, sign and send to us.

8 To transfer a DC pension you would need a Cash Equivalent Transfer Value (CETV) certificate before going ahead. These are usually only valid for three months from the issue date, so if the expiry date is less than 30 business days away you may need to obtain a new one during a transfer, which could yet affect the final value. You may also need positive financial advice to proceed with the transfer, depending in the value of your pension.

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Eligibility to invest in a Vanguard Personal Pension depends on your individual circumstances. Please be aware that pension and tax rules may change in the future and the value of investments can go down as well as up, so you might get back less than you invested. You cannot usually access your pension savings or make any withdrawals until the age of 55.

If you are not sure of the suitability or appropriateness of any investment, product or service you should consult an authorised financial adviser. Please note this may incur a charge.

Important information

This article is designed for use by, and is directed only at, persons resident in the UK.

The information contained in this article is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so.

The information in this article does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this article when making any investment decisions.

Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.

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