Few people work for one employer and stay a member of a single pension scheme for all their life until they retire. It's common for people to build up a patchwork of pensions (e.g. perhaps some occupational salary-related pension from some jobs, and personal or stakeholder pensions perhaps when working for an employer who did not provide an occupational pension scheme) before they retire. The Pensions Advisory Service provides some information about this, as does the government.
Early leavers in occupational schemes will generally have two choices:
- If you have worked for less than two years, you will probably either be able to get your contributions back less tax, or transfer the full value of your pension to a new pension scheme; or
- If you have been in the scheme for more than two years, you will either be able to leave your pension where it is (called a 'deferred' or 'preserved' pension) or move it to a new scheme.
If you are in a 'money purchase' scheme, it is relatively straightforward to see the effects and benefits of moving it or keeping it where it is. If you were a member of a Group Personal Pension (GPP) or Stakeholder Pension Plan, you can't receive a refund of contributions regardless of how long you were a member.
Deciding what to do when leaving a salary-related pension is very complicated area, particularly if you are deciding whether to transfer your pension fund to a new employer. You will need specialist advice.