What happens to your workplace pension when you leave a job

When you leave a job, the pension you built up there does not go away and it does not go back to your employer. Your workplace pension belongs to you, even if you leave your employer in the future¹, and when you change jobs your pension belongs to you². What changes is that the money stops growing through new contributions: both yours and your employer's payments into that scheme end on your last payday.

From that point the pension becomes what is known as a deferred pension. If you stop paying into the scheme, you will still get that pension when you reach the pension scheme's age². In the meantime the money either stays invested (in the most common type of scheme) or stays promised (in a final salary type scheme), and you have choices about what to do with it: leave it where it is, transfer it to another scheme, or combine it with a new employer's scheme.

Your workplace pension stays yours when you leave

A workplace pension is a way of saving for retirement that is arranged by your employer: a percentage of your pay goes into the pension scheme automatically every payday, in most cases your employer also adds money, and you may get tax relief from the government as well⁷. Some workplace pensions are called "occupational", "works", "company" or "work-based" pensions, but they are the same thing⁷.

All of that money, yours, your employer's and the government's contribution in the form of tax relief, is yours from the moment it lands in the pot¹. Leaving the employer who set the scheme up changes nothing about ownership. The pension cannot be taken back by the employer, and it does not depend on you staying in any job.

What leaving does is freeze the pot at the level it had reached. It becomes a deferred pension: no new money goes in, but the value you had built up is preserved and paid to you when you reach the age the scheme allows². Many people accumulate several of these deferred pots over a working life, one for each employer, and each one keeps its own rules, charges and benefits until you do something with it.

If you lose track of an old pot, it has not disappeared. There are tracing services that can help you find lost pensions⁸, and the dedicated guide to finding lost schemes explains how to use them.

Contributions stop on your last payday

The simple rule is that contributions stop when your pay stops. Neither you nor your former employer pays anything more into that scheme after your final payday, and the employer has no ongoing duty to add to a leaver's pot.

The position while you are still employed but on paid leave is different, and worth knowing because it affects the size of the pot you carry with you. You and your employer continue to make pension contributions if you are getting paid during maternity leave, and the same principle applies on other paid leave: your contribution is based on your actual pay during that time, while your employer's contributions are based on the salary you would have received if you were not on leave².

Once you have actually left, though, the scheme simply records what was paid in up to that date. In a defined contribution scheme the pot stays invested and can go up or down with the markets. In a defined benefit scheme the amount you earned up to leaving is locked in and calculated under the scheme's rules. Either way, the record of your membership, its dates and its value is kept by the scheme, and you can ask them for it at any time.

Defined contribution or defined benefit: what leaving means for each

What leaving means in practice depends on which of the two main types of workplace pension you were in, and the difference is worth understanding before you make any decision about the pot.

Defined contribution (DC) is the most common type of workplace pension today⁹. The money paid in is put into investments by the pension provider, and what you get depends on how much was paid in, how well the investments have done, the provider's charges and how you take the money¹⁰. The amount you get at retirement usually depends on how much is contributed, how long you contribute and how well the investments performed¹¹. When you leave, the pot simply stops receiving contributions and stays invested. Nothing about the leaving itself changes its value, though the investments continue to rise and fall.

Defined benefit (DB), sometimes known as final salary or career average schemes, is a workplace pension based on your salary and how long you worked for your employer¹². The amount you get at retirement is based on how long you were a member of the pension and your earnings¹¹, usually worked out as a fraction of your salary multiplied by your years of membership¹¹. These pensions do not depend on investments; the employer makes contributions and is responsible for making sure there is enough money at retirement to pay a secure income for life¹². Defined benefit pensions were the most common type until the 1980s⁹, so older jobs are more likely to have left you with one. When you leave, the pension you had earned to that date stays promised and is paid at the scheme's pension age.

The two types behave so differently after you leave that the rest of this page separates them where it matters, especially on transfers. The comparison of defined benefit vs defined contribution goes into more detail.

Your options for an old pension pot

Broadly, you have three options with a deferred pot, and you can mix them across several old pensions: leave it where it is, transfer it to another scheme, or combine it with another pot. You can choose which pensions you want to combine and which to keep separate, and you do not have to consolidate them all⁴.

Leaving it where it is is the default, and it is often the least work. The scheme continues to hold the money under its rules. If your old employer goes out of business, you will not lose a defined contribution pension fund, though in a trust-based scheme your pot might be slightly reduced because administration costs are paid from members' pots¹⁴. A defined benefit pension has its own safety net, covered later on this page.

Transferring it moves the money to a different scheme or provider, often to bring several pots together or to get a scheme you prefer⁴. How that works, and what it can cost, is the subject of the next sections.

Combining pots is a form of transferring, and it is a choice with two sides. Which? has modelled the difference it can make: leaving pensions where they are produced a total pension value of £424,218 after 20 years in its example, against a different outcome for the consolidated case⁵. Consolidating outside of a workplace scheme may result in losing employer-matched contributions, and some providers charge fees for transferring out, which can cancel out the benefits of consolidation⁸. The comparison of combining pension pots or keeping them separate sets the trade-offs side by side.

Whatever you do, it is worth making sure the scheme knows who you would want the money to go to if you die. You can usually choose someone, such as your spouse, a family member or a friend, who will get your pension pot if you die before the scheme's pension age, usually chosen in writing and changeable later¹⁵. And note that you may also be able to draw all or some of your lump sum and pension while still working full or part-time for the same employer, depending on the scheme's rules¹⁶, so leaving is not the only trigger for thinking about these choices.

Moving an old pension: how a transfer works

A pension transfer is where you move the money in your existing pension to a different scheme or provider, often so you can get a better deal⁴. You can transfer your UK pension pot to another registered UK pension scheme¹⁷, and you can usually transfer or consolidate your pensions at any point, unless the scheme rules list restrictions⁴.

The process, as the financial regulator sets it out, usually runs in this order⁴:

1. Check your current scheme allows transfers out.
2. Make sure you will not lose any benefits.
3. Decide which scheme to transfer into.
4. Check if you need to pay for financial advice.
5. Ask your current provider for a transfer value.
6. Ask the new scheme to start the transfer.

A transfer often takes between two and six weeks, but your provider has up to six months to action your request⁴. The same six-month limit is stated from the other direction: your existing company must move your pension within six months of the start of the transfer process⁵. Transfers are generally possible any time up to one year before the date when you are expected to start drawing retirement benefits, and in some cases it is also possible to transfer to a new provider after you have started to draw retirement benefits¹⁷.

There are two mechanical ways the money moves: either your old provider sells your investments and moves your money in cash, or the existing investments are moved across as they are, known as an in-specie transfer⁵. Not everyone can transfer at all. You might not be able to transfer your pension if you have a share of an ex-partner's pension following a divorce, or a scheme with special features or guarantees like a Guaranteed Minimum Pension¹⁸.

Some schemes have their own deadlines. In the Scottish Police pension scheme, for example, you must apply for a transfer payment within six months of leaving Police employment or opting out of the Police scheme¹⁹. If a transfer is delayed beyond what the rules allow, the guide on delayed transfers explains what to do, and the wider page on transferring pensions and investments to another provider covers the mechanics in depth.

Transfer costs and what you can lose

Transfers are not free of consequences, and the regulator's list of what you may lose is worth reading in full. When you transfer, you may have to make payments to the new scheme, pay a fee to make the transfer, lose any right you had to take your pension at a certain age, lose any fixed or enhanced protection, or lose any right you had to take a tax-free lump sum of more than 25 per cent of your pension pot¹⁷.

The last of those matters more than people expect. Normally you can take up to 25 per cent of a defined contribution pot tax-free, to a maximum of £268,275⁶, and 25 per cent of a small pot is tax-free with Income Tax on the rest²⁰. Some older schemes promised a larger proportion, and a transfer extinguishes that right. Some providers also charge exit fees for transferring out, which can cancel out the benefits of consolidation⁸.

Where things go wrong, the Financial Ombudsman sees a pattern. Complaints about transfers commonly involve an adviser not disclosing higher charges, the loss of guarantees such as guaranteed annuity rates, market value adjustments on with-profits funds, unsuitable risk checks or investments, and the loss of workplace pension benefits²¹. MoneyHelper puts the whole decision in one sentence: you could save money or lose valuable benefits²².

Transferring pension savings overseas is a further step with its own tax implications, depending on your circumstances and the type of scheme you transfer to¹⁷; the guide to your pensions if you move abroad covers it. If you have already transferred and think the advice or the process was wrong, the page on complaining about a pension provider explains the route, and the Pensions Ombudsman can look at complaints about transfers.

Final salary pensions: extra rules before you move them

A final salary (defined benefit) pension is a different animal to transfer, because what you would be giving up is a guaranteed income for life. Defined benefit pensions give a guaranteed income for life after retirement based on your final salary or career-average earnings⁶, and the employer is responsible for making sure there is enough money to pay it¹².

Because that guarantee is valuable and cannot be rebuilt once given up, the law adds a checkpoint. Anyone considering transferring a final salary pension worth more than £30,000 must seek financial advice⁵, and you will usually have to pay for that advice¹⁷. Some schemes will not accept transfers without advice whatever the value⁵. Independent guidance is blunt about the general position: it is usually best to leave your money in a final salary pension rather than transfer it to a defined contribution scheme⁵.

If you do transfer a defined benefit pension into a defined contribution scheme, you lose the promise of a guaranteed retirement income for life with automatic annual increases⁴. Some defined benefit schemes might not allow transfers out at all: after your pension has started paying out, within a year of reaching normal retirement age, or if you have an unfunded public sector scheme like the NHS or Teachers' Pension Schemes⁴. The page on public sector pension schemes explains which schemes are affected, and the guide to transferring out of a final salary pension goes through the decision in detail.

Taking your pension early: from 55, rising to 57

Leaving a job does not unlock the money. The earliest you can usually take a personal or workplace pension is age 55, rising to 57 from April 2028, unless you need to retire early due to poor health³. The same change is dated more precisely elsewhere: the minimum access age rises to 57 on 6 April 2028¹³. You cannot take money from your pension until you are at least 55, rising to 57 in 2028, but you can do so at any point after that²³.

Defined benefit schemes have their own pension age, typically 60 or 65¹³, and the scheme pays from that age unless you choose otherwise. Taking a defined benefit pension early reduces it. Official guidance gives a worked example: Michael, whose scheme retirement age is 60, retired at 58, and his pension will be reduced by 10 per cent because it is paid two years early²⁴. Early payment is also possible on ill-health grounds, and the guide to taking your pension early because of ill health covers that route.

You can claim a personal or workplace pension while still working, as long as you have reached the age agreed with your pension provider²⁵. When you do take money, the options include taking up to 25 per cent tax-free⁶, putting the rest into drawdown, where the pot stays invested and you draw income as and when you wish, subject to income tax on what you take²³, or buying an annuity. The overview of your options for taking money from a pension sets them all out, and free guidance is available from Pension Wise.

Joining your new employer's scheme

While your old pot sits deferred, your new job comes with its own pension duties. When your new employer automatically enrols you into their workplace pension scheme, they must write to you with the date they added you, the type of pension scheme and who runs it, how much they will contribute and how much you will have to pay in, and how you can leave the scheme²⁶.

You are not forced to stay. Employers must let you leave the pension scheme, called opting out, if you ask, and refund money you have paid if you opt out within one month²⁶. Your employer has to tell you the start and end dates of the one-month opt-out period²⁰. Opting out of a new scheme means giving up the employer's contributions and the government's tax relief, which is why guidance generally treats staying in as the default; the page on how to opt out and get a refund explains the mechanics.

Some schemes refund contributions automatically in the earliest weeks: in the Scottish Police pension scheme, if you leave within three months of being enrolled, your employer will automatically refund any contributions you made, less deductions¹⁹. If your new employer has taken over your old employer, or schemes have merged, the new employer must provide access to a replacement pension that meets or exceeds the government's standards, give information about the new scheme, and enrol you automatically if you are eligible¹⁴.

The minimum contributions are set by the automatic enrolment rules: a total of 8 per cent of qualifying earnings, made up of 5 per cent from you, including tax relief, and 3 per cent from your employer⁶. If you earn £6,240 or less a year, your employer does not have to contribute, but can choose to do so²⁰. The pages on automatic enrolment and contribution rates cover the detail.

Protecting your old pension from scams and loss

Deferred pots are a favourite target of pension scammers, precisely because their owners are not paying attention to them. The law has responded: the Pension Schemes Act 2021 protects members from pension scams by helping trustees of occupational pension schemes ensure transfers of pension savings are made to safe and not fraudulent schemes²⁷. Despite concerns from industry that 5 per cent of pension transfers could have features of a scam, the regulator maintains a strategy to combat pension scams²⁸.

The practical protections around an old pot are several:

• If your employer goes bust, you will not lose a defined contribution pension fund¹⁴, and a defined benefit pension may be protected by the Pension Protection Fund²⁹, a statutory fund created to protect members of DB schemes if the scheme's sponsor becomes insolvent³⁰.
• If there is a shortfall caused by fraud or theft, the Pension Protection Fund may be able to recover some money¹⁴.
• If you are in debt, money held in your pension usually cannot be claimed by anyone you owe money to, even if you are declared bankrupt or in a formal debt repayment plan¹⁸. Money you have already taken out of the pension can be claimed by creditors.
• Compensation levels: the PPF generally pays 100 per cent compensation to members who reached their scheme's normal pension age, to those retired on ill-health grounds regardless of age, and to those receiving a pension in relation to someone who had passed away at the time the employer became insolvent³¹. The comparison of PPF vs FSCS protection explains which body covers which type of pension, and the FSCS covers certain pension arrangements in its own right³².

If a transfer is offered, the warning signs and the rules are gathered in the guide to pension scams. Concerns that relate to a workplace pension, including dishonesty or fraud in the scheme or significant concerns about how it is being run, can be reported to The Pensions Regulator²⁹. Free, impartial help is available from MoneyHelper and Pension Wise guidance before any commitment is made, and the Pensions Ombudsman handles complaints if something has already gone wrong.