What happens to my pension when I change Jobs?

Nothing will happen to your pension when you leave your current employer, your pension is your money and the pension fund belongs to you and even if you change your job, you keep the pension benefits that you have built up, and you can decide what happens to your pension. 

Different options for your pension when you change your job

Annual fees or administrative charges on group personal pension schemes may creep up when you leave your current employer as the negotiated fee rate during employment may not apply when the pension is no longer active or deferred so it is almost certainly a good idea to get your pension reviewed at the very least once you leave your job.

You should also check that you will not lose any valuable benefits or incur penalties before deciding to transfer.

Leave it where it is

Your pension funds remain invested and continue to grow, however, you may be liable for paying administration charges that may have been previously paid by your old employer.

Transfer it to a new employer’s workplace scheme

This depends on whether your new existing scheme will allow you to transfer in and if the rules for your previous scheme allow you to transfer out. Most auto enrolment schemes such as Nest facilitate transfers both in and out.

You should also check that you will not lose any valuable benefits or incur penalties before deciding to transfer.

Transfer it to a personal pension scheme or a SIPP

This depends on whether the rules for your previous scheme allow you to transfer out. 

Defined contributions pensions

With a defined contribution pension, the value of the fund is based on how much you and your employer contributed to the scheme and how the funds have performed.  

These are usually quite easy to transfer if you wish to, but it is recommended that you get proper financial advice before making any decision.

Defined benefits pension schemes

This type of pension is becoming less common nowadays and is usually only offered to senior staff of large companies or public sector employees including the NHS, police, fire service, armed forces and teachers.

Defined benefit pension schemes are not usually easy to transfer or sometimes impossible, you may have to satisfy certain criteria before the pension administrators will allow the transfer, and you must also have a specially qualified financial advisor to assist you with the process.

Keep track of your old pension pots

The most important thing when changing your job is not to lose track of your pension fund. Make sure you are aware of who administers your pension fund when you leave your job.

If you do lose track of any pensions, which is quite common, there is a free government service called the Pension Tracing Service  to help you locate lost pension funds, 

You will need your National Insurance number, an employer’s name or a pension provider to benefit from the service.

You will need to contact your pension provider to get full information such as the value of the scheme.

Should you consider consolidating your pensions?

Many people choose to consolidate their pensions into one fund. This makes things much easier for you to manage and often results in benefiting from one administration charge rather than lots of different funds with various charges. 

The more you have in your pension, the lower the charges will be, and you also only have just one pension provider to contact should you need to for any reason.

It is recommended that you take advice from a qualified financial advisor should you wish to consolidate your pensions.

Can I cash in a pension from an old employer?

If you are under 55 years old you will not be able to cash in your pension fund whatever the value is. Once you are 55 you will be able to access or cash in your pension fund.

At age 55 if you wish to cash in your pension fund completely, only the first 25% is tax free the remaining 75% is taxable therefore you could stand to pay HMRC a substantial amount of the fund in taxes.

Better options to consider for accessing your funds at age 55 are to take 25% as a tax-free lump sum and enter into a drawdown which means your money is still invested for the future and continues to grow, any withdrawal over 25% will be charged at your usual rate of income tax. 

You may also wish to consider purchasing an annuity that pays a guaranteed monthly income.

Get expert advice

Changing jobs and possibly your pension is life a event. Therefore, any decision needs to be based on a careful, expert assessment of all circumstances. 

Let Regulated Advice match you with a financial advisor for expert advice.