What to do with small pension pots

Changed jobs a few times? You could have multiple small pension pots sitting with old employers, making it hard to track your retirement savings. Here are some practical ways to take control of them.

By Lauren Leyshon-Thomas

New

Created on: 13/01/2026

Reading time: 5 mins

Key takeaways

’Small pension pots’ are defined as valuing £10,000 or less.
You have three options once you’ve traced yours: leave it alone, combine with another pension pot, or cash it in (if you’re at retirement age).
It’s important to understand the Money Purchase Annual Allowance (MPAA) rules once you start withdrawing a pension

If you’ve changed jobs more than once, you may have accumulated several smaller pension pots over the years. And now you’re a little older and wiser, you might be learning about the benefits of combining pensions and wondering how to track down yours.

No matter if it was just a temporary role over a Christmas period, an apprenticeship or a graduate role, if you were eligible, you likely had a pension scheme set up for you at the time. According to research by LV, the average person switches jobs every five years (and according to Cengage Learning, for Millennials, it’s an average of fifteen jobs throughout their career!).^[1]

As pensions are essentially investment accounts to put towards your retirement, it’s in your interest to trace these old pots down and make a decision on what to do next — you may find combining them in one pot (consolidation) is the best choice, or if they have generous benefits, perhaps leaving them where they are is better.

Importantly, there are factors to consider if you have ‘small pots’ and are close to retirement age, as some circumstances can trigger the Money Purchase Annual Allowance (MPAA), limiting future contribution limits. Read on to find out your options for your small pot pensions.

What is considered as a ‘small pot pension’?

Put simply, a ‘small pot pension’ is a pension with a value of £10,000 or less.

While this might seem like a lot of money at the start of your working life, by the time retirement rolls around, your investments would ideally have built to a sizeable sum that could allow you a comfortable lifestyle.

£31.1 billion is estimated to be unclaimed in lost, inactive or forgotten pension pots in the UK — with the average estimated as holding £9,470 each. ^[2] So, is this the perfect time to track down yours?

When auto-enrolment was introduced to the UK workforce, this was a beneficial way for eligible employees and employers alike to pay into a pension scheme. But, with so many people job-hopping, it’s easy to forget about these pots (especially when we’re young and financial planning isn’t top of mind).

The problem with lost small pension pots is that while they are sitting in a state of dormancy, they could have been put to better use for you. It’s better late than never to make a decision on whether to combine them or shop around for schemes with better fees, etc.

Small pot pension rules

When the time to retire arrives (55 years old but rising to 57 by 2028), the rules for a small pot pension work as follows.

For pots valued at £10,000 or less:

You can take a lump sum that you haven’t already taken ‘drawdown’ from.
25% of your withdrawals are tax-free, the remaining 75% is taxed:
- So, if you take out £1,000: £250 of this would be tax-free and £750 would be taxed.
There is a limit of three small pot lump sums for ‘personal pensions’ you may hold (separate to any workplace schemes you may have).
For workplace/occupational schemes, you can take an unlimited number of small pots lumps sums from pensions.
You’d be taking these withdrawals as lump sums, rather than as ‘drawdown’ (which is when you receive a regular income from your pension).

That’s not to say you have to stick to having smaller separate pots. If you happen to combine multiple pension pots and the value goes above £10,000, you can use the ‘Uncrystallised Fund Pension Lump Sum (UFPLS)’ method to drawdown instead, which tax rules work the same but on higher value pots.

How to find all your pension pots

You can use a pension tracing service to find your old workplace pension pots. Pension tracing is the ideal bit of ‘life admin’, because it could take much less energy than you might expect, and could have a positive effect on your lifelong financial planning.

While there are plenty of tracing services to choose from, including Wealthify’s Pension Finder, many people make a start with the government’s Pension Tracing Service to track down the pension providers that their previous employers used.

Once you have all of your pension providers’ contact details, you could then use those contact details to reach out to them, find out how much the pension fund is currently worth, ask whether they’d charge an exit fee if you decide to move the pension elsewhere, and instruct them on what you’d like to do next from there.

Note: separate to the Gov.uk’s Pension Tracing Service mentioned above, the government is also introducing a ‘Pension Dashboard’ service to show the general public their available pensions. However, it’s worth noting that this may not pick up smaller pension pots, so it may still be in your interest to get a different pension tracing service to double-check.

What are your options for small pension pots

If you’ve tracked down some small pension pots with values of £10,000 or less, here are your three main options for what you could do next:

Leaving your small pension pots alone

You could decide to just leave them where they are.

Pros:

You could remain within the ‘small pot pension’ rules (holding three pots of £10,000 or less).
No exit fee (some providers charge you to move your pension elsewhere).
Might be a better option if you have a defined benefit scheme with protected benefits.

Cons:

You could be missing out on the compounding interest effect (although this isn’t guaranteed to perform better than keeping them separate).
You may have multiple providers by the time you reach retirement, causing you or your loved ones more admin down the line.
Potentially higher fees (it’s worth knowing how much this provider charges, in case you do decide to shop around).

Merging pension pots

Merge, combine, consolidate — whichever term makes most sense to you; the idea is that you’re transferring your pensions into a central pot.

Pros:

Older workplace pensions might be charging ongoing fees that are quite high, so it may be better to combine your pensions together in a pot with more affordable fees.
Modern pension pots, like Self-Invested Personal Pensions (SIPPs), may be cheaper in fees and offer you more flexibility with how your money is invested.
Consolidating your smaller pots into one place could save you more money in the long term.

Cons:

You may need to pay an exit fee to leave your current provider — consider weighing this up against the ongoing admin costs.
You could potentially lose some protected benefits like guaranteed income; keep an eye out for whether your pension is described as a ‘defined benefit’ scheme.
Consolidating doesn’t mean you’re guaranteed to earn more by having more money in one pot. It depends on the performance of your funds and the difference between your providers’ approaches towards this.

Cashing in your small pension pots

You could think about cashing in your small pension pots if you’re approaching 55; but remember, in 2028 this will be pushed back to 57 years old.

There are a couple of considerations:

If you have a personal pension, you can only cash in up to three small pension pots in your lifetime. However, lump sum withdrawals on workplace schemes that are £10,000 or less are unlimited.
Remember the tax implications: 25% of your withdrawals would be tax-free, with 75% being taxable.
If you’re concerned about triggering the Money Purchase Annual Allowance (MPAA), thankfully this wouldn’t happen with a small pot of £10,000 or under — a major bonus for cashing them in.

Combine your small pension pots

If you’ve tracked down some of your small pots and want to combine them into one place, Wealthify offers a straightforward pension consolidation service.

Our Self-Invested Personal Pension can offer a range of flexibility and invested in a style that suits your values:

Ethical or Original funds.
Managed by our in-house investment experts.
Low and transparent fees.

Learn more about how to consolidate your pensions with Wealthify

Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.

With investing, your capital is at risk, so the value of your investments can go down as well as up, which means you could get back less than you initially invested.

Wealthify does not provide advice. If you’re not sure whether investing is right for you, please speak to a financial adviser.