What happens to your pension when you move jobs?
The job market looks very different to how it did a generation ago. People move roles more often, switch industries mid-career, and think nothing of handing in their notice if a better opportunity comes along. That’s all well and good — but every job move raises a question that most people quietly ignore: “What happens to my pension?”.
It’s a fair question, and the answer matters more than most people realise. With the average person now expected to have around eleven different employers throughout their working life, keeping on top of pension pots has never been more important.
Your pension doesn’t move with you automatically
When you leave a job, your pension stays put. It doesn’t transfer to your new employer on its own. Whatever you’ve built up sits with the old provider until you decide what to do with it.
You haven’t lost it. It’s still yours. But it may not grow in the way it could if it’s sitting forgotten in an old scheme, with no alignment to your financial plan, and potentially higher charges eating into it year after year. That’s why it’s worth understanding your options early rather than leaving it to sort out later.
Auto enrolment at your new job
The moment you start a new role, auto enrolment kicks in. If you’re between 22 and State Pension age and earning more than £10,000 a year, your employer must enrol you into a workplace pension within three months of you starting.
Current minimum contributions stand at 5% from you (which includes tax relief) and at least 3% from your employer. Some employers go above the minimum, particularly if you choose to contribute more yourself. It’s worth finding out what your new scheme offers rather than assuming the basics are the best on offer — you might be surprised.
Opting out might seem tempting if money’s tight, but your employer’s contribution is essentially part of your pay. Walk away from it and you’re turning down free money, which is rarely a decision you’ll look back on fondly.
So what are your options with the old pension?
Leave it where it is
This is the simplest route, and for some people it’s perfectly sensible. If you’ve got a defined benefit (final salary) pension from a previous employer, in most cases you’re better off leaving it alone. Those schemes carry guarantees that are genuinely hard to replicate elsewhere.
For defined contribution pensions, leaving it in place is fine short-term — but do keep track of it and review it from time to time.
Transfer to your new employer’s scheme
Most modern workplace schemes will accept transfers in. You request a transfer value from your old provider and move the money across, which keeps things tidy and easier to manage in one place.
Before doing this, check whether your old pension has any special benefits attached to it. Some older policies carry guaranteed annuity rates or other features that would disappear on transfer. If you’re not sure what you’ve got, speak to an independent financial adviser before making any moves.
Move it to a personal pension
A self-invested personal pension (SIPP) or personal pension plan gives you more flexibility over how your money is invested and can bring multiple old pots together under one roof. This route suits people who want more control over their investments, but it does come with more responsibility too. Get proper advice before going down this road.
Should you consolidate?
If you’ve moved jobs several times, there’s a decent chance you’ve got pension pots scattered across multiple providers. Each one comes with its own statements, its own charges, and potentially its own investment approach. That’s not a particularly efficient way to build towards retirement.
Bringing everything together can make sense when:
- You want a single, clear view of what you’ve actually got saved
- You’re paying higher charges on older pots than you would on a consolidated plan
- You’re getting closer to retirement and want things streamlined
That said, consolidation isn’t always the right move. Defined benefit pensions, protected tax-free cash entitlements, and guaranteed annuity rates are all features worth holding onto. The Pensions Regulator requires taking regulated financial advice before transferring any pension with safeguarded benefits worth more than £30,000, and there’s a very good reason for that rule.
A proper independent review of all your pensions together is the only reliable way to know whether consolidation makes financial sense for your situation.
How to track down old pensions
It’s easy to lose track of pensions from jobs you held years ago, especially if you’ve moved house or the company has since closed. Here’s how to find them.
The Government’s Pension Tracing Service (available at gov.uk/find-pension-contact-details) is free to use and helps you locate contact details for old schemes. It won’t tell you how much is in there, but it’ll point you in the right direction.
When you contact an old provider, have the following ready:
- Your National Insurance number
- Your former employer’s name and approximate employment dates
- Any old paperwork, policy numbers, or annual statements you’ve kept
The Government’s Pensions Dashboard is also in development. Once it’s live, it’ll let you see all your pension information in one place online, which will make tracking down old pots considerably more straightforward.
A couple of practical points
Whenever you change jobs, check the nominated beneficiary on any pension you hold. Life changes — marriages, separations, new children — and your pension provider won’t know unless you tell them.
Also check whether you can pay more into your new employer’s scheme. If they’ll match additional contributions above the minimum, that extra money could make a meaningful difference to where you end up at retirement.
Conclusion
Pension decisions aren’t straightforward, and what works for one person may not work for another. At Fairview, we’re independent financial advisers in Essex with no ties to any particular provider. We look at your full picture and give you advice based on your circumstances, not a product we’re looking to sell.
Whether you want help tracking down old pensions, weighing up your transfer options, or putting together a clear retirement plan, we’re happy to have that conversation. Get in touch with us today.