WORKPLACE pensions can be tricky to navigate, especially as you’re not likely to keep the same job through your entire working life. But what happens to your pension when you leave a job? Here are the steps to follow.
When you change your job it’s likely you’ll leave behind a workplace pension for that particular company. Even if you change jobs just two or three times during your career, it can be hard to keep track of how much your pensions are worth and where your money is being invested. All employers have to offer a workplace pension scheme by law, and in an effort to encourage more employees to save for their retirement, the Government gradually introduced a scheme called Auto-Enrolment.
What happens to your pension when you leave a job?
If you leave your current job, then your workplace pension still belongs to you and you won’t have lost any of the money you earned.
If you don’t carry on paying into the scheme, the money will remain invested and you will receive your pension when you reach the pension’s required age.
You can also join another workplace pension scheme if you get a new job too.
There are, however, some circumstances in which you can get your money back from the workplace pension scheme.
If you were in a defined benefit pension scheme for less than two years, you might be able to either:
- Get a refund on what you contributed
- Transfer the value of its benefits to another scheme (a cash sum transfer)
This depends on the type of defined benefit scheme and its rules. Check with your employer or the pension scheme provider to find out more.
The steps you need to follow
You can normally transfer the pension benefits held up in a scheme that you’ve left to a new pension service at any time up to, generally, one year before the date when you’re expected to start taking retirement.
In some circumstances, you can even transfer after you’ve started getting the retirement benefits, but this isn’t very common.
The first step is to find out your cash equivalent transfer value (CETV), also known as your transfer value.
You can do this by asking your scheme administrator or pension provider directly.
They may ask you to request in writing, and they could have a form that you need to fill out in order to do so.
Your scheme administrator or pension provider will then provide you with a statement of entitlement.
If you’re eligible for a CETV, this has to be provided to you within three months of asking for a transfer value.
The statement is a written document that sets out your transfer value, together with details of the benefits you’ve built up, and information that your new programme will need if you decide to proceed with the transfer.
If your statement relates to benefits held in a defined benefit pension scheme, the transfer value is guaranteed for three months.
If you don’t start transferring within the three month period, the actual amount transferred may be higher or lower than the amount shown in your statement.
If you’re a member of a defined contribution pension scheme, the transfer value may change as the value of the investments held in your scheme also change.
In the case you decide to transfer to a new pension, your scheme administrator of pension provider has to pay the benefits across to the new scheme within six months from the start of the transfer process.
It’s really important to note that you must have left your scheme and are no longer a member for this to apply, and if you’re still an active member then the guaranteed transfer value won’t count.
