/ Money

Are all your different pensions driving you potty?

Lots of plant pots containing money

How many pensions do you have? If you’ve been working for a while the answer’s probably at least two. What happens to each pot when you move jobs and why isn’t it easier to lump them together? Soon, it might be…

How many jobs have you had in your career so far? I’m 27 and have chalked up three ‘proper’ jobs plus my fair share of side jobs like bar work.

Two of these offered a pension scheme, which I readily took up, so I now have two pension pots with relatively small amounts in them.

The multiple pension pots conundrum

Gone are the days when we took a job at graduation and stuck it out till retirement. Given that the average person now has 11 job changes in their career, I’m looking at accruing another handful of pension pots before I retire.

It’s no wonder that lots of people lose track of them, or have no idea how much is in each one, and have very little idea of what to do with them all on reaching retirement.

What’s worse is that lots of us are paying administration fees on our previous job’s pension schemes in the form of ‘deferred member penalties’. These admin fees sometimes double after you change jobs and are no longer an ‘active member’ of your scheme.

We think this is really unfair and have been asking the government for years to stop unfair charges and find a solution for all these pesky small pots. That’s why we were quite chuffed when the government announced a number of different proposals to combine people’s pensions pots, in a bid to help people create one big fat pot for themselves.

This will save money by reducing administration fees and make dealing with retirement income much simpler than it is at the moment.

How will new pension proposals work?

There are basically two proposals. The first is that your pot – no matter how big or small – automatically follows you around from job to job. The second is that employees who leave a job with a small pension pot, (under a certain amount of money) will automatically have their small pot transferred to a low-charging third party scheme.

A quick straw poll of nearby colleagues tells me that all of them have at least two pension pots. Most can’t remember where they are held or what the charges are and only a few of them know what to do with them on reaching retirement.

Have you accrued more than one pension pot? Have you kept on top of them all? Do you know how to go about accessing the money in them when you reach retirement? And what do you think the government should be doing to simplify this process?


Yes I have multiple pension pots and I know roughly how much each is worth. I don’t know how to lump them together.

But, why can I not manage them myself? I wouldn’t be paying so much in charges which would offset any supposed professional advantage any company can give.

I too have multiple pots and I would like to merge them as an annuity would be greater from a single pot than 3 or 4 smaller.

For interest, many years ago (10 or 11 I think) I suggested that it would be a good idea if I could take all my pension pots and pay off my mortgage, I could then transfer the current mortgage payment into pensions savings which would have equated to a very nice sum and I would not have had a mortgage to worry about.

But rules is rules and that wasn’t allowed!

Jeff says:
13 January 2012

I only have 2 pots, but I wish that I had none for two reasions

1. The overall growth of the oldest one taken out in 1995 has been minimal since the stock markets tumbled a few years ago.
2. The annuity that they pay is pitiful. A single life annuity starting at age 65 pays about 5%. So without any growth in the capital it would last you 20 years. But after the first year there is still 95% of YOUR capital in the providers coffers, and they have had a year to invest it. So even at a modest rate of growth, at say 3%, they still have 98% of your capital. (Although if they are not doing better than this, they are incompetent). This goes on year after year, so they are making a handsome profit unless you live to be well over 100 which is unlikely. AND even worse is that if you die after just a few years, they keep your money anyway.

If I had that cash myself, ok I would not have got tax relief on the contributions, but I could have done so much better with the fund, and when I start to draw on it I could do a lot better than the meagre 5% or so that I expect they will give me.

When I started working at Which? I (along with our finance team) arranged for my old pension to be merged into my new one, because I didn’t want to lose track of them. It was something I checked when I took out my first one as I knew I wouldn’t be working for that company forever. As I continue my career, I’ll keep trying to do this to keep all the money in one place – I think the proposal that your pot follows you around is a good one.

Barbara says:
22 January 2012

I have a few pension pots from two jobs. I plan to retire from my current job next year and am putting quite a lot into my current (stakeholder) pension. But the other pots have not insignificant amounts in them, and I am seeking to combine all of them (bar one, which has a guaranteed annuity rate) to buy one open market annuity. I’m not sure of the mechanics – do I just instruct all the pension providers to transfer the money to the annuity provider I choose, or do need to I combine the pots somehow first?