What Happens to Your Pension When You Change Jobs?
When you leave an employer, your pension contributions from that employer stop, but the pension pot remains yours. You become a "deferred member" of the scheme. Your money stays invested and continues to grow (or shrink) based on market performance.
With auto-enrolment, the average worker changes jobs 11 times during their career, which can easily result in 8-10 separate pension pots scattered across different providers.
Your Options When Changing Jobs
You have three main choices when you move to a new employer:
- Leave the pension where it is: Your old pension stays invested. Good if the scheme has low charges and strong performance
- Transfer to your new employer's scheme: Consolidates pots and simplifies management. Check the new scheme's charges and fund options first
- Transfer to a personal pension or SIPP: Gives you full control over investments. Useful if you want to consolidate multiple old pensions
How to Find Lost Pensions
The average person has around £13,000 in lost or forgotten pensions. If you have changed jobs multiple times, you may have pension pots you have forgotten about. Here is how to track them down:
- Pension Tracing Service: The government's free service helps locate old workplace and personal pensions
- Check old paperwork: Look for pension statements, joining letters, or payslips showing pension deductions
- Contact previous employers: They can tell you which pension provider they used
- Check your National Insurance record: Your NI record shows all employers, which can help identify periods with pension contributions
Common Mistakes When Changing Jobs
Avoid these frequent pension errors when moving between employers:
- Not joining the new pension immediately: Some employers offer enhanced contributions from day one. Delaying means missing free money
- Forgetting about old pensions: Small pots left behind can be eroded by charges over time
- Transferring without comparing charges: Your old scheme may actually have lower fees than your new one
- Ignoring employer matching: Many employers will match contributions above the minimum. Check what is available and contribute enough to maximise the match
- Not updating beneficiary nominations: When you leave a pension scheme, check that your expression of wish form is up to date
Should You Consolidate Your Pensions?
Consolidating multiple pension pots into one can simplify your retirement planning. Benefits include easier management, a clearer picture of your total savings, and potentially lower charges. However, consolidation is not always the right move:
- Some older pensions have valuable guaranteed benefits (such as guaranteed annuity rates)
- Charges on your current pots may be lower than the receiving scheme
- Transfer penalties may apply on some older contracts
Always compare the full picture before consolidating. If in doubt, seek professional pension advice.
NI Credits and Continuous Employment
Changing jobs does not normally affect your National Insurance record, provided you move straight from one employer to another. However, if there is a gap between jobs:
- Gaps of a few weeks are usually covered automatically within the same tax year
- Longer gaps may need voluntary NI contributions to protect your State Pension
- Check your NI record online to ensure there are no unexpected gaps