What happens to your pension money and benefits when you leave your pension?

Leaving your pension scheme happens when you leave your employer, you decide to opt out of the scheme, or you stop making contributions to it. What you’ve built up still belongs to you. You usually have the option to keep the pension where it is or move it to another pension scheme.

A summary of what happens

  • If you leave your pension scheme, you don't lose what you've built up. What you've built up continues to belong to you and you have several options for what to do with what you’ve built up. Your scheme administrator or pension provider should tell you which options apply to you.
  • If you leave a defined benefit scheme and have at least two years of membership, you'll have built up entitlement to a guaranteed income which will be payable to you at retirement age. Its value will be increased broadly in line with inflation from the date you leave the scheme up to retirement age.
  • If you leave a defined contribution pension scheme and have been a member for at least one month, your pension pot will remain invested and the amount of income you might get at retirement will depend on how your pension pot grows and the charges you pay in that time.

If you’ve been a member of a defined benefit pension scheme

If you’ve been a member of a defined benefit (final salary or a career average) pension scheme for at least two years,  the guaranteed income you have built up will remain in the scheme and you will be able to claim it at retirement age. Some schemes may also offer you this option if you’ve been a member for less than two years.

When you leave the scheme, the scheme administrator will work out the amount of guaranteed income that you’ve built up, based on your length of membership of the scheme and your earnings. They'll tell you the amount of this income (it may be referred to as your ‘deferred pension’).

The value of your deferred pension will then be increased at least in line with inflation each year from the date you leave the scheme to the retirement date set by the scheme.

Different parts of your deferred pension may be increased by different amounts, depending on:

  • The scheme’s rules
  • The period of your service with your employer that the pension relates to
  • When you left the scheme, and
  • If the scheme was contracted-out of the additional State pension schemes, whether you have an amount of Guaranteed Minimum Pension (GMP) or Reference Scheme Test Benefits (RST).

Your scheme might choose to increase your deferred pension at higher rates than the minimum rates specified in law.

If you’ve been a member of a defined contribution pension scheme

If you’ve been a member of a defined contribution pension scheme, such as a workplace or personal pension scheme, and you stop contributions, the value that you've built up in your pension pot can remain invested until you decide to start taking money from your pension.

You usually have the option to change your investments at any time.

Check with your pension provider what charges may apply as these can have a significant effect, especially if the value of your pot is small.

You might also be able to continue making contributions to the pension, depending on the type of pension you have. Ask your pension provider/administrator who will be able to confirm what is possible.

You'll usually also have the option to move your pension to another pension. For example, you might decide to bring your pension with you to your new workplace pension if you're changing jobs. This can help you keep track of your pensions more easily. 

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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
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Whatever your circumstances or plans, move forward with MoneyHelper.

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