What options do I have with my pension when I change jobs?

When you change jobs, you may be wondering what will happen to your pension. It’s a common question and concern, but the good news is that there are several options available to you.

Option 1: You could leave your pension where it is.

It may be that the previous pension you have is a defined benefit pension plan (also known as a final salary pension) or a pension that provides some attractive guarantees you wouldn’t want to lose. You can leave them where they are, which is often referred to as retaining a “preserved or paid-up pension.”

Depending on the type of pension you retain, it can provide different outcomes. Generally, if it is a defined benefit pension, this type of plan will continue to provide an increasing benefit until the normal retirement date. If it is a defined contribution plan, it will remain invested and continue to perform in line with the fund it is invested in.

Option 2: You could transfer your pension to your new employer.

Depending on the type of workplace pension your new employer has, you may be able to transfer the money from your old pension into the new one. It can be a good option if you have multiple pensions from previous jobs and want to keep your pensions in one plan.

Workplace pensions generally provide good actively managed funds and have maximum charges that can be applied to your funds, meaning they are generally low-cost. Due to these benefits, it’s generally worth considering your workplace pension plan first when consolidating.

Following our comments for Option 1, if your previous pension is a Defined Benefit pension or another pension containing guarantees, it may be more beneficial to retain these pensions as they are. You should seek advice towards these types of pension, before considering transferring them.

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Our free retirement guide will help you start the planning process, whilst taking a look at the income you’ll need, the pension options available to you at retirement and how you could make use of investments to support your lifestyle.

Option 3: You could transfer your pension into your personal pension.

Similarly, as highlighted in Option 2, you may wish to consider transferring your previous workplace pension if suitable into your own personal pension or self-invested personal pension (SIPP).

You may have set up your own plan or via a financial adviser. By transferring into this, you can keep your investments aligned with your own fund selection. It is also common practice for individuals to retain a personal arrangement separately from a workplace arrangement so that in the future, previous plans can be combined together into a personalised arrangement rather than a set workplace arrangement defined by an employer.

As noted in Option 2, advice should be sought before considering transfer of a Defined Benefit pension or a pension containing guarantees, into a personal pension.

Option 4: You could start taking your pension benefits.

Depending on your age, it may be that you can access your benefits now. Currently, you can access defined contribution pensions from age 55 (moving to 57 from 2028). Defined benefit pensions may also be accessed, although it can depend on the rules of the scheme.

Accessing pensions prior to your state retirement age is becoming more common. With state pension ages being increased, accessing pensions early to enable you to move to a part-time basis or to retire completely can be an attractive option.

However, prior to making the decision to access your pension or to retire, you should assess your income requirements in detail and whether your pension provision will be sufficient for your retirement income needs, before making any decisions. We recommended taking financial advice before accessing your pensions or retiring.

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There are pros and cons to each of these options, and the best choice for you will depend on your personal circumstances. It’s important to consider factors such as your age, your retirement goals, and your financial situation.

It’s also a good idea to seek financial advice before making any decisions about your pension. A financial adviser can help you understand your options and choose the one that is right for you.