Can you combine a SIPP, Defined Contribution, and a Defined Benefit pension into one?

Date: 27/03/2019
Author: Christopher Evans
Company: Pension Works Limited

With so many people having multiple pension schemes thanks partly to auto-enrolment, merging pension pots has become a common way to make retirement planning a little easier – it’s much easier to keep track and ensure you will have built up enough pension funds for a comfortable retirement. However, because there are many different types of pensions, it can sometimes be difficult.

What different pensions might I have?

It is useful to know exactly what category your pension scheme falls into – that way, you and your pension adviser can make the best decision when consolidating your pension:

• A defined contribution pension is where money is paid in by you and maybe your employer if a workplace pension is invested.

• A defined benefit pension pays you a set income throughout your retirement, linked to inflation. There are two kinds of defined benefit pension schemes – a final salary pension, where the payout is based on your salary at retirement, and a career average scheme, based on your average salary over your career.

• A SIPP – self invested personal pension – is more complex. Designed for those who are more comfortable making their own decisions about investing, you choose where you invest and your investment strategy. Although these are often great for those who are keen investors, they can be more complicated and more expensive. You may have even more paperwork. As you will have invested in multiple investment funds – for example, stocks and shares – you may get reports from every individual fund manager.

With so much to think about, it’s perhaps not surprising that many people give up on their personal pension, and leave their pension funds as they are, hoping they will have enough to retire. Retirement planning, however, is too important to be left to chance.

Can I combine my pensions?

If you have several defined contribution pensions, pension consolidation can be straightforward. As well as keeping track of your investments, you can ensure they are performing well and checking you are avoiding hidden charges or high management fees. If you’re a seasoned investor and already have a SIPP, it makes sense to transfer your defined contribution pension pot. Your pension contributions will be reinvested. Remember, however, that you are responsible for managing a SIPP pension and for monitoring its performance, and the value of any pension investment can go down as well as up.

For a defined benefit pension, it may well be best to leave it where it is. Final salary or career average schemes have several benefits, most importantly a guaranteed income in your retirement – a final salary pension is often thought of as the best for this reason. It is possible to convert it into a lump sum, and then transfer into a defined contribution pension. However, it’s essential to seek financial advice from regulated financial advisers like Pension Works to make sure that you do not lose money.

Overall, it’s certainly possible to combine different types of pensions. It’s important to remember that you don’t necessarily need to transfer everything into just one pension. With the average person having eleven jobs throughout a career and potentially eleven pensions (1), consolidating this to two or three would certainly make things easier. A pension adviser accredited by the Financial Conduct Authority (FCA) like Pension Works, is in the best position to look over your financial situation and advise on what works best for you.

To get free, impartial advice on pension consolidation, contact us today on 0808 164 2664. Or, to find out more about Pension Works, visit