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My Employer Has Changed Pension Provider

Changing Jobs 5 min readGuide 19
My Employer Has Changed Pension Provider

Employers sometimes change their workplace pension provider. This guide explains what happens to your existing pension pot, what your options are and what to check when your employer switches schemes.

Quick answer

When your employer changes pension provider, your existing pot is usually transferred to the new scheme automatically. You should receive written notification explaining what is happening and what your options are. Check for any valuable benefits in the old scheme before the transfer takes place, some benefits, such as guaranteed annuity rates, are lost permanently on transfer.

Why employers change provider

Employers change pension providers for a variety of reasons, lower charges, better investment options, improved member services, a change in the employer's size or structure, or simply because a better deal is available in the market. Provider changes are relatively common, particularly among smaller employers.

A change of provider does not necessarily mean anything has gone wrong. In many cases, the new scheme will offer better terms than the old one. However, it is important to understand what is happening and to check that the change is in your interests.

What happens to your existing pot

When an employer changes pension provider, the existing pension pots of active members are usually transferred to the new scheme in what is called a bulk transfer. This is typically done automatically, you do not need to do anything to initiate the transfer.

You should receive written notification from your employer and both providers explaining what is happening, when the transfer will take place and what your options are. The notification should also tell you about any changes to charges, investment options or other scheme features.

During the transfer, your money will be out of the market for a period, typically a few days to a few weeks. This carries some investment risk, but it is usually unavoidable in a bulk transfer.

What to check before the transfer

Before the transfer takes place, check the following:

  • Does your old scheme have any guaranteed annuity rates or other valuable guarantees that would be lost on transfer?
  • Are the charges on the new scheme lower, higher or similar to the old scheme?
  • Does the new scheme offer appropriate investment options for your needs?
  • Is the new scheme's default fund appropriate for your circumstances?
  • Are there any exit fees on the old scheme that would reduce the transfer value?
Steve

Steve's observation

Provider changes are one of the situations where I most often see people lose valuable pension benefits without realising it. The notification letter arrives, it looks routine, and people assume everything is fine.

The key question to ask is: does my old scheme have any guaranteed annuity rates or other guaranteed benefits? If the answer is yes, you need to understand the value of those benefits before agreeing to the transfer. In some cases, the right answer is to opt out of the bulk transfer and leave your pot with the old provider, even if it means managing two separate pensions.

Your options

In most cases, you have the following options when your employer changes provider:

  • 1
    Accept the transfer, Your pot moves to the new scheme automatically. This is the simplest option and is appropriate if the new scheme offers good terms and there are no valuable benefits in the old scheme.
  • 2
    Opt out of the transfer, You can usually choose to leave your pot with the old provider. This may be appropriate if the old scheme has valuable guaranteed benefits. However, you will need to manage two separate pensions going forward.
  • 3
    Transfer to a personal pension, You can transfer your pot to a personal pension or SIPP instead of the new employer scheme. This gives you more control but means you lose the employer's scheme benefits.

After the switch

After the switch, check your payslips to confirm that contributions are being deducted correctly and paid to the new provider. Log in to the new provider's portal to confirm that your pot has been transferred correctly and that your personal details are up to date.

Also check the investment fund you have been placed in. The new scheme may have a different default fund from the old one, and you may need to review whether it is appropriate for your circumstances.

If you are not happy with the new scheme

If you are not satisfied with the new provider, for example, because the charges are higher or the investment options are limited, you can usually transfer your pot to a personal pension or SIPP. However, check for any exit fees and consider the full picture before transferring.

You can also raise concerns with your employer. If the new scheme is significantly worse than the old one, your employer may be willing to reconsider or to negotiate better terms with the provider.

Pause for thought

  • Have you received notification that your employer is changing pension provider? If so, have you read it carefully?
  • Does your old scheme have any guaranteed annuity rates or other valuable benefits that would be lost on transfer?
  • Have you compared the charges and investment options of the new scheme to the old one?
  • After the switch, have you confirmed that contributions are being paid correctly to the new provider?

Coaching point

When you receive a notification about a provider change, do not assume it is routine. Take 30 minutes to read it carefully, check for any guaranteed benefits in the old scheme and compare the terms of the new scheme. If anything is unclear, contact your employer's HR team or the pension provider directly.

Key terms

Scheme transferThe process of moving pension benefits from one scheme to another, in this case from an old employer scheme to a new one.
Bulk transferA transfer of multiple members' pension pots from one scheme to another at the same time, typically when an employer changes provider.
Guaranteed annuity rate (GAR)A valuable benefit in some older pension schemes guaranteeing a higher-than-market annuity rate at retirement. May be lost on transfer.
Continuity of serviceThe principle that a change of pension provider should not result in a break in pension saving or loss of benefits.
Default fundThe investment fund your contributions are placed into automatically. The new scheme may have a different default fund from the old one.

Frequently asked questions

What to do next

If your employer has recently changed pension provider, check that the transfer has been completed correctly and that your contributions are continuing. If you have any concerns about the new scheme, speak to your employer or take financial advice.

You have now completed the Workplace Pensions Knowledge Hub. If you would like to discuss your pension situation in more detail, our advisers are here to help.

This guide provides general information only and does not constitute personal financial, pension, investment or tax advice. Guaranteed annuity rates and other scheme benefits vary. Appropriate regulated financial advice should be considered before making decisions about pension transfers or scheme changes.
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