What happens to your pension when you leave your job?

Starting a new role at a different company is exciting, but it can be daunting, too. So, thinking about what happens to your pension when you leave your job is probably at the back of your mind as you focus on settling in and getting to know your team.

But after paying into a pension at your previous company, you don’t want to just forget about it.

After all, the money in it is yours – and it’s there to fund your future retirement.

And if you’ve worked for an employer for a number of years, there could be a nice bit of money in your pot, which you’ll want easy access to when you’re ready to stop working.

So, if you’ve ever wondered, “what happens to my pension when I change jobs?”, keep reading to discover what steps you can take to keep track of the various pots you end up with.

Use the links below to jump to a specific section:

• What happens to my workplace pension when I change jobs?
• Can I withdraw my workplace pension early?
• What happens to auto-enrolment?
• Can I opt out of my workplace pension?
• What are your options for an old pension?
• How do I find old pensions?

What happens to my workplace pension when I change jobs?

If you’ve been employed, then there’s a good chance you already have a workplace pension – or even multiple ones if you’ve had more than one job.

But if you’re unsure of how they work, here’s a quick explainer.

Workplace pensions are arranged by your employer, and you’ll be enrolled into the scheme if you meet the eligibility criteria (which we’ll go into later).

There are two types of workplace pensions:

Defined benefit schemes: you’re more likely to have this type if you work in public services, and whether you pay in (or your employer fully funds it) will depend on the scheme you’re enrolled in. These typically give you a set income when you retire, which is based on your salary and how long you were enrolled in the scheme.

Defined contribution schemes: these are the most common type of pension, and both you and your employer will pay in a percentage of your eligible salary every month (which are any earnings between £6,240 and £50,270 before tax each year). You’ll pay 5%, and your employer will put in a minimum of 3%. The money is then put into investments to give it a chance to grow.

So, what happens to your pension when you leave a job?

Even if you’ve moved to a new company and have been enrolled into a different pension scheme, the pot you had with your old one doesn’t just disappear into thin air. It remains yours.

In the case of a defined contribution benefit pension, you’ll still be entitled to regular payments from this when you reach a certain age.

However, if it’s a defined contribution pension you had, any money that’s been paid into it will remain invested and will continue to have the opportunity to grow until you withdraw it.

Can I withdraw my workplace pension early?

Typically, you can’t withdraw from your workplace pension earlier than the age specified by your scheme (unless you have an illness that means you can no longer work).

This means you can’t just withdraw because you’re no longer paying into that specific pot.

So, what are the current rules around when you can take your pension?

For private schemes (like workplace pensions and personal pensions), it’s usually after you’re 55, but the minimum age is set to change to 57 from April 2028¹. However, this isn’t automatically the case for every pension – meaning each of yours could have different rules.

There are companies that promise they can help you withdraw your pension early (even if you’re not experiencing ill health) by giving you a personal loan or cash advance.

But as you’ve probably guessed, there is a catch. This is classed as an ‘unauthorised payment’ – so you would be taxed on it, and this could be by as much as 55%.²

What happens to auto-enrolment?

When you start working for a new employer, you’ll be enrolled into their pension scheme if you:

• Spend most of your time working in the UK
• Earn over £10,000 per year
• Are aged between 22 and State Pension age³

But because auto-enrolment happens when you join a new company, your contributions will stop after you’ve left that job – and that includes payments from them too.

However, this does mean you’ll be automatically enrolled into a new pension scheme by your new employer when you start working for them (provided you still meet the above criteria, of course!).

Can I opt out of my workplace pension?

Yes – you can opt out of a workplace pension if you wish, and you’ll need to do this by contacting your provider directly. Your employer can tell you how to do this, if needed.

But something to remember is that opting out doesn’t just mean you won’t pay in – your employer won’t either. This means you’ll miss out on that extra money being invested (and given the chance to grow for your retirement).

Paying into a workplace pension can also have tax benefits, too:

• If you’re in a net pay arrangement, the money will be taken from your pay before it’s taxed.
• If you get relief at source, your contribution will be put into your pension after you’ve paid tax and National Insurance on it. You or your pension provider can then claim tax relief on it (which will be at the basic rate, no matter how much you earn).

But what happens if you are sure you want to opt out, but have already made some contributions?

If you do this within a month of being enrolled, you’ll get back any of the money you paid in. But if you do this later, the money will usually stay invested in your pension until you reach the minimum withdrawal age (which is determined by the provider).

This means that even if you do opt out, it can still be handy to know what happens to your pension when you leave your job as you could still have money in one.

What are your options for an old pension?

If you have a pension from your previous job, here’s what you could do with it when you switch to another company:

Leave your pension where it is: what happens to your pension when you change jobs is that any money you paid in will stay in that pot until you transfer or withdraw it. If you do decide to keep it where it is, it will remain invested, giving it the chance to continue growing over the years, but you typically won’t be able to add any further contributions to it.

Transfer to a new employer scheme: if you’ve been enrolled into a new scheme by your current employer, then you may be able to move your old pensions into this new pot. However, make sure to check whether your new schemes accepts transfers, and if you’ll pay fees or lose any benefits.

Start a Personal Pension or SIPP: this is another way you can consolidate pensions into one pot. If you move them into a SIPP (like our Personal Pension), rather than another workplace pension, you can choose how much you pay in and how often, and have more control over how your money is invested. But again, do check if you’ll incur transfer fees or lose any benefits.

What if I’ve had multiple jobs?

If you’ve had multiple jobs over the years, then you could have just as many pensions – and these may all be with different providers and have varying amounts tucked away in them.

Transferring your old pensions into one pot (like a Wealthify SIPP) could allow you to:

• Easily keep track of how much you have saved
• Pay less in fees (if you go for a provider with lower ones)
• Have more control over what your money is invested in
• Top-up your retirement fund when it suits you

But what if you’re not sure who your old ones are with? Well, the good news is that there are ways to hunt them down – like using the government’s Pension Tracing Service.

And if you are interested in transferring your old pensions into one but don’t know where to start, why not check out our pension consolidation guide?

Will I lose my pension if I leave before a certain time?

Sometimes, a role or company just isn’t the right fit for you. And that’s okay.

But because of this, another question you may have is: what happens to pensions when you leave a job after a brief period – like only a few months? Do you need to have worked there for a certain amount of time to be entitled to that money?

It actually doesn’t matter how long you worked at a company – if you were enrolled into a pension scheme while you were there, you’ll be able to claim it when you retire.

So, no matter how long you stayed at your past jobs, it’s worth knowing where your old pots are.

How do I find old pensions?

Don’t worry if you can’t remember who your pensions are with, or how many you actually have.

It’s common to lose track of them – especially if you’re someone who has moved jobs a lot, or it’s been a number of years since you last worked for a company.

But what steps can you take to hunt them down?

If you have a defined contribution pension, you should be getting annual statements from them – so a good place to start can be by searching for terms like ‘pension’ and ‘statement’ in your email inbox, or by riffling through that drawer that’s full of old letters.

There’s also the government’s Pension Tracing Service, which may be able to help if you know the name of the provider, or even just your employer who set it up for you.

And if you need more help with this, we actually have a handy guide on how to find lost pensions.

What about defined benefit pensions?

As we’ve already explained, there are two types of workplace pensions.

These are defined benefit pensions and defined contribution pensions (which are sometimes called ‘final salary’ or ‘career average’ schemes).

Defined contribution schemes are more common, but you may have a defined benefit pension if you worked for a large employer or in the public sector.

Here’s a reminder of how both types of work pension work:

With defined benefit pensions, it’s worth noting that these are also split into two types:

• With a final salary scheme, the amount you get is based on the highest salary you earned.
• If it’s a career average scheme, it’s based on your average salary over your entire career.

So, what happens to your pension when you leave your job if you were in a defined benefit scheme rather than a defined contribution one?

Although the money hasn’t been invested and left to keep growing, your benefits will be preserved – meaning your pension will still be there waiting for you when you retire.

But does that mean it’s best to keep it where it is, or should you move your defined benefit pension to a new provider, along with any other pensions you have?

Although we can’t offer you financial advice at Wealthify, it’s worth bearing mind that the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) believe that it is in most people's best interests to keep their defined benefit pensions.4

This is because you could lose benefits, such as a guaranteed income and inflationary protection, if you transfer them elsewhere.

There are also fees to consider with defined contribution schemes, and as the money is invested, the value of your pot may go down, as well as up, over time.

So, what happens to pensions when you leave jobs? Moving on doesn’t mean losing the savings you’ve built up. So, if you have various pots lying around, why not consider transferring them into Wealthify Personal Pension to make them easier to keep track of?

References

1. Government website: Increasing normal minimum pension age
2. Government website: higher tax on unauthorised payments
3. Government website: Joining a workplace pension
4. FCA: Pension transfer defined benefit