Collect the pencils: Here is an example: In a classroom, the teacher tells a student to collect the pencils. This means that the student will get the pencils from each student. Each student will give his pencil Pick up the pencil(s): the pencil is on the table or on the floor, I will pick up the pencil and put it in my pocket. Another example: more than one pencil is on the table or on the floor, I can ask someone to pick up all the pencils. I hope these examples help you.

Hi! I don't think there would be a problem if you said "pick the pencil up" but I know for sure that you can use "pick up the pencil" in an informal situation.

With verbs like "pick up" sometimes you can separate it by putting the object in the middle "pick THE PENCIL up" but in this case it sounds much better to say "pick up THE PENCIL." "Collect" wouldn't be the same as picking it up off of your desk or the floor, for example. It would be more like going around an office or room and taking the pencils from everyone until you have a bunch of pencils. To clarify the difference between the two: a teacher in a classroom may say, "I will come around and collect your papers" after giving a test. Then if she drops one on the floor while collecting them, she will pick it up off the ground.

You pick a pencil up (off something) You collect them (from somewhere/someone). It's hard to make the distinction clear but the formality is not the issue.