What happens to my pension when I change jobs?
Following the introduction of auto-enrolment, every company in the UK must enrol eligible staff into a workplace pension scheme automatically. But what happens if you change jobs? We explain everything you need to know.
There are two types of workplace pensions: defined contribution and defined benefit.
Changing jobs doesn’t mean losing the pension benefits you’ve built up.
As you move from job to job, it might be worth consolidating your pensions so you don't lose track of them.
The government has a pension tracing service to help you find lost pensions.
Changing jobs is common when you’re developing your career.
But you may be worried about what happens to your pension when you move to a different company.
We explain what happens if you leave your current employer or change your employment status.
Before we jump into what happens to your pension when you change jobs, it’s a good idea to understand the various types of workplace pensions.
What are the different types of workplace pensions?
There are two types of workplace pensions: defined contribution and defined benefit, the latter of which is also known as a final salary pension.
Defined contribution
Defined contribution pensions are the most common.
What you receive at retirement is based on how much money you pay into your pension and how well your investments have performed. These are usually straightforward to transfer to if you want to.
Defined benefit
Defined benefit pensions are less common and are now normally only offered to public sector workers.
These pensions pay a guaranteed income for life that increases annually in line with inflation, which makes them very valuable.
The amount you get is based on your salary and the number of years you worked for that employer.
However, defined benefit pensions are not so easy to transfer, and if you have a transfer value over £30,000, you will need to get financial advice before you can proceed.
Some defined benefit pensions allow you to claim your contributions back if you’ve only worked for an employer for a short time.
Schemes offered to NHS staff and teachers usually provide a refund option if you’ve had your pension for less than two years.
What are your pension options if you change jobs?
Changing jobs doesn’t mean losing the pension benefits you’ve built up.
The pension fund belongs to you.
If you’ve been enrolled in a defined contribution pension, you can either leave the funds where they are and draw on them at retirement or transfer them to another personal or workplace pension.
It’s wise to check you’re not going to lose any decent benefits or incur a penalty before making any transfer, and a financial adviser can help with this.
Most workplace pensions will allow you to contribute even after leaving your employer.
So, while it’s easy to move your pension, it may be worth keeping your other pensions, as charges may be lower, or the fund performance may be better.
Above all, don’t lose track of your pension plans and make sure you keep updated records and your wishes are clear if you die.
Should you consolidate your pension pots?
As you move from job to job, it’s easy to lose track of your pensions. That’s why it could make sense to bring them all together in one place.
Here’s why consolidating your pensions might work for you:
✅ Easier to manage: By consolidating your pensions, you won’t have to waste time tracking them down separately in the future.
✅ Less admin: With all your pots in one place, you only need to contact one provider if your circumstances change.
✅ Easier to review: It’s simpler to see whether you’re on track for achieving the retirement you want by only reviewing one pension and the fund’s performance.
✅ Lower charges: By transferring all your pension pots into your latest plan, you may potentially benefit from lower charges, but it’s worth checking before doing this.
Learn more: Should you consolidate your pensions? The pros and cons
How do you find your pensions?
We’ve talked about how important it is to keep track of your pension pots, but what if you’re having problems tracing them all?
The government has a pension tracing service to help you find a lost pension.
This service is free, but you will need the name of an employer or the pension provider to get started.
This might not be a quick and easy process, as companies and pension providers can merge or change names over time.
Why is it important to trace lost pensions?
You can never have too many contributions to your pension pot (well, you can, but the pension limits are pretty high and most people will not exceed them), so it’s important to track down old and unclaimed pensions and consolidate them.
And in the unlikely event that you have exceeded the savings limits or may be about to, you’ll want to know about this in good time to avoid a tax penalty.
Most pension providers and former employers are obliged to send you a yearly statement, setting out an estimate of the income you might expect from the scheme during retirement.
If you’re no longer receiving these statements, perhaps because you’ve changed your address, opted out of a state earnings-related pension scheme (SERP) in the past, or have changed jobs, it’s time to start tracing as losing a pension can be costly.
Remember, if a pension remains unclaimed for six years after your selected retirement age, you will no longer be entitled to it.
Potentially, this could mean losing tens or even hundreds of thousands of pounds.
Seek expert pension advice
When you start a new job, you will normally be auto-enrolled into your new employer’s pension.
It’s then up to you whether you keep your old employer’s scheme going, consolidate it into your new scheme or a separate personal pension, such as a self-invested personal pension (SIPP).
Consolidating pensions will simplify things and potentially minimise charges.
If you decide against this, it’s important that you know exactly where all your pensions are and keep your providers updated if your address changes.
You should consult a financial adviser if you’re considering consolidating any pensions.
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