Should the self-employed combine their pensions?

Combining pensions

Did you ever work for someone else? If so, it’s likely that you have a pension or two scattered around that you rarely think about.  

They’re not exactly dormant. Thanks to the magic of compound growth, that pot of money will likely have been steadily growing. Research from Penfold reveals that in the UK, we underestimate the value of our pensions by up to 33%.  

That means your old pensions from your employed life could be larger than you think - particularly if it’s been a while since you worked there.  

So what should you do with them now? 

Combining them means that you can easily see how much is in your pension for retirement. This way, you won’t have to hold on to different providers’ pension statement letters or log on to a series of provider portals to try to do the maths yourself. 

Instead, your total pension savings are all there in one place, giving you greater visibility of how much you have and how much more you need to save. You may also avoid multiple different withdrawal fees when you come to take your pension (if your other providers charge them). 

But before you combine them, here’s some things you need to think about.  

Fees and charges  

It is important to compare providers’ various fees when deciding on whether to transfer. 

For example, if you were 35-years old with a £10,000 pension pot invested for 30 years until you were 65-years old, with a 7% annual investment growth performance and a 2% annual fee, your pot could be worth £44,452. If you had been with a pension provider with just a 0.75% annual fee, this same pot might be worth £64,994. This difference in fees might cost you £20,542. 

Also consider the exit fees you might face for transferring your pension. Percentage exit fees are particularly bad for those with large pots, for example a 1% exit fee for a £100,000 pension would give a massive £1,000 exit fee. 

Fixed fees are particularly bad for those with smaller pots, for example a £50 fee for a £500 pot would represent a 10% reduction in the size of your pot. This is why it is worth assessing how big your pot is, how far away you are from retiring, and especially all of the hidden fees on an annual, exit and withdrawal basis. 

Ask yourself the following questions: 

  • How much does your current pension cost and how much will the new pension cost? 

  • Will your current pension provider charge a transfer out (exit) fee? 

It is really important to be flexible and transparent by having no other fees, except our all in one annual fee of either 0.75% (for BlackRock’s funds), or 0.88% (for HSBC’s fund). This means no fees for exiting, or withdrawing your pension as an annuity, lump sum or drawdown. 

Risk type 

Unfortunately, you cannot predict nor guarantee the future performance of an investment fund, despite its past performance. As a result, there is no guarantee that transferring a pension will result in getting a higher pension value and higher income at retirement. 

However, it’s important to understand the objectives and strategy of the fund your old pots are invested in, the investments available by your new pension provider and whether this is appropriate for you at any particular time.

Is it transferable? 

Remember, not every type of pension is able to be transferred - so you’ll need to check your documentation or speak to your old provider to make sure you’re able to transfer your pot. 

Some pensions also offer special benefits or guarantees. In particular, Defined benefit or final salary pensions are often very generous and can be complicated to transfer. 

If you have a defined benefit plan, we recommend chatting with an independent financial advisor before making a decision 

Once you’ve transferred, you have 30 days to change your mind. You can use this window to request to move your pension back to your old provider. 

Just remember that your pension may have dropped in value while invested in your new plan. 


So, it’s fair to say there’s quite a bit to think about. We’d recommend setting aside an hour, getting all the information together that you have and noting down all the various fees you might be subject to. If you don’t have some information about your old pensions, don’t worry. Thanks to the power of tech they’re easy to track down these days. Here’s how you do it. 

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Pensions aren’t just a long-term investment to set yourself up for the future. They’re also a fantastic way to make sure you keep more of your hard-earned profits today. Penfold has built a modern, powerful pension that’s easy to use, flexible and only takes a few minutes to set up - no paperwork required.

Penfold is regulated by the Financial Conduct Authority and our customers’ pension holdings are protected by the Financial Services Compensation Scheme.