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Leaving a Job. What Happens to Your Pension?

Changing Jobs 5 min readGuide 12
Leaving a Job. What Happens to Your Pension?

When you leave a job, your workplace pension does not disappear. This guide explains what happens to your pension when you change employers, your options and what to do to keep track of it.

Quick answer

When you leave a job, your workplace pension does not disappear. Contributions stop, but the money already in your pot remains invested and belongs to you. You can leave it where it is, transfer it to your new employer's scheme or move it to a personal pension. You do not have to do anything immediately, but you should keep a record of it.

What happens to your pension when you leave

When you leave an employer, your workplace pension contributions stop. You are no longer an active member of the scheme, you become what is called a deferred member. Your pot remains invested with the provider and continues to grow or fall in line with investment performance.

The money in your pot belongs to you. Your employer cannot take it back, and it does not expire. However, if you do not keep track of it, it can become a forgotten pension, one of the millions of unclaimed pension pots in the UK.

Defined contribution pensions

If you have a defined contribution pension, your pot remains invested in the funds you chose (or the default fund) after you leave. The provider will continue to manage the investment and deduct charges. You will usually still receive annual statements.

It is important to keep your contact details up to date with the provider so you continue to receive statements and can access your account. If you move house and do not update your details, you risk losing track of the pension.

Defined benefit pensions

If you have a defined benefit pension and you leave before retirement, your pension entitlement is preserved in the scheme. You become a deferred member and your pension will be paid from the scheme's normal retirement age.

The value of your deferred pension is usually revalued each year in line with inflation (subject to a cap), to protect its purchasing power. You will receive annual statements showing the current value of your deferred entitlement.

Steve

Steve's observation

The average person in the UK changes jobs around 11 times in their career. That means potentially 11 different pension pots, with 11 different providers, in 11 different schemes. Without keeping track, it is very easy to lose sight of what you have built up.

I always recommend keeping a simple record, even just a note in your phone, of every employer you have worked for and the pension scheme they used. It takes two minutes to do when you leave a job and can save hours of searching later. The Pension Tracing Service is excellent, but prevention is better than cure.

Your options when you leave

When you leave a job, you have three main options for your pension:

  • 1
    Leave it where it is, Your pot remains with the current provider, invested in the current funds. This is the simplest option and may be appropriate if the scheme has good investment options and low charges.
  • 2
    Transfer to your new employer's scheme, You can ask your new employer to accept a transfer from your old scheme. This consolidates your pensions and may simplify management, but check the new scheme's charges and investment options first.
  • 3
    Transfer to a personal pension, You can transfer to a personal pension or self-invested personal pension (SIPP). This gives you more investment choice and control, but you lose the employer's scheme benefits and take on more responsibility for managing the investment.

Guide 13 covers the transfer decision in detail, including the factors to consider and the risks involved.

Keeping track of old pensions

Every time you leave a job, make a note of the pension scheme name, the provider and your policy or membership number. Keep this information somewhere safe, a spreadsheet, a note in your phone or a physical file.

Log in to each provider's portal periodically to check the value and update your contact details. If you have lost track of an old pension, the government's free Pension Tracing Service (pensiontracing.service.gov.uk) can help you find the contact details for old schemes. Guide 14 covers tracing lost pensions in detail.

Starting a new job

When you start a new job, you will usually be automatically enrolled in your new employer's workplace pension scheme within six weeks, if you meet the auto-enrolment criteria. Check your payslip to confirm that contributions are being deducted and that your employer is contributing.

Also check whether your new employer's scheme accepts transfers from old pensions, and whether the charges and investment options are competitive. This is a good time to review your overall pension position and consider whether consolidation might be beneficial.

Pause for thought

  • Do you have a record of all the workplace pensions you have built up over your career?
  • Are your contact details up to date with all your pension providers?
  • Have you considered whether any of your old pensions should be transferred or consolidated?
  • If you have recently started a new job, have you confirmed that auto-enrolment contributions are being deducted correctly?

Coaching point

When you leave a job, add a note to your phone or a spreadsheet with the employer name, pension provider and your membership number. It takes two minutes and could save you hours of searching later. Also update your contact details with the provider before you leave, it is much easier to do while you still have access to your work email.

Key terms

Deferred memberA pension scheme member who has left the employer but has not yet taken their pension benefits. Their entitlement is preserved until retirement.
Preserved pensionA pension entitlement that is kept in a scheme after you leave employment, to be paid at the scheme's normal retirement age.
RevaluationThe annual increase applied to a deferred defined benefit pension to protect its value against inflation.
VestingThe process by which you become entitled to keep employer pension contributions. Some enhanced contributions may require a minimum period of service.
Pension Tracing ServiceA free government service that helps you find contact details for lost or forgotten pension schemes.

Frequently asked questions

What to do next

Make a list of all the workplace pensions you have built up and check that your contact details are up to date with each provider. If you are considering transferring an old pension, read Guide 13 first.

This guide provides general information only and does not constitute personal financial, pension, investment or tax advice. Pension transfer decisions can be complex and irreversible. Appropriate regulated financial advice should be considered before transferring or consolidating pensions.
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