Small Pension Pots Advice and Consolidation

Published / Last Updated on 05/04/2024

We are approached regularly by potential clients with several small pension pots built up from a series of employments.  For example: 4 small pension pots of £3,000, £5,000, £500 and £150.

The time to deliver full analysis, research, advice, and a written report in addition to consolidate all pension transfers into one will likely take 20 to 30 hours meaning a fee of around £2,000-£3,000.  This is clearly uneconomical for any pension saver.

The government and regulator have already recognised this and has already proposed a ‘pensions pot for life’ that your small pension pots can be automatically transferred to when your leave employment.  This may be better to the current options of:

  1. Leave the small pot where it is and a cost burden on the pension provider as well as the individual.
  2. Cash in under pensions ‘small pots’ rules.  This is where you are allowed to cash in up to 3 small pension pots (worth below £10,000) during your lifetime and 25% is paid as a tax-free lump sum and the balance has withholding income taxes applied at 20%.

Clearly, if you change employment regularly, you may build up lots of little pots and then end up cashing them in meaning you have no real pension provision in retirement.

Our Guidance when Advice is not Cost-Effective for Small Pension Pots

We felt it useful to supply some guidance for people in this position, so that you can at least make some educated decisions on comparing your pension schemes and perhaps choosing which one is best for you to consolidate into.  We suggest you create a table such as the example below and ask each pension company the following questions:

Questions to Ask

Pension Scheme 1

Pension Scheme 2

Pension Scheme 3

Pension Scheme 4

What is the initial charge/entry charge?(usually a %)





What is the ongoing platform charge?(usually a % pa)





Are there any guarantees or bonuses?





Are there any penalties?





What retirement options are available? Such as annuity, flexible drawdown and even beneficiary drawdown (on death)





What are the investment fund choices and the performance of each fund?





By collecting and comparing all of the above, this should put you in a better position to be able to identify which schemes are cheaper, offer greater fund choice or ‘at retirement’ options.  This should then help you to decide which ones to consolidate.

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