Leaving your pension scheme
Keeping your benefits pot in your scheme
Leaving your pension scheme occurs when you leave your employer, if you decide to opt out or stop making contributions, for example. If you leave your pension scheme, the benefits you’ve built up still belong to you. You have the option to leave them where they are or to transfer them to another pension scheme.
If you leave your pension scheme, you don't lose the benefits you have built up. They continue to belong to you and you have several options for what to do with them. Your scheme administrator or pension provider should tell you which options apply to you.
If you’ve been a member of a defined benefits pension scheme for at least two years, you must be given the option to leave your benefits in the scheme. You may also be offered this option if you’ve been a member for less than two years.
If you’re a member of a defined contribution pension scheme, such as a money purchase pension scheme, personal pension, self-invested personal pension (SIPP) or stakeholder pension (SHP) scheme, and you stop contributions, the value that you have built up in your pension scheme can remain invested until you decide to draw retirement benefits. You usually have the option to change your investment funds (switch funds) in the future.
You should check with your pension provider what charges may apply, as these can have a significant effect, especially if you have only built up a small pension pot.
When you leave the scheme
When you leave the scheme, the scheme administrator will work out the pension benefits that you’ve built up, based on your length of membership of the scheme and your earnings. They will tell you the amount of this pension (called your ‘deferred pension’).
The value of your deferred pension will then be increased at least in line with inflation each year from your date of leaving to the date that you start to draw your retirement benefits. Since April 2011, the Consumer Prices Index (CPI) has been used as the measure of inflation, prior to this the Retail Prices Index (RPI) was used.
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).
- Your scheme may choose to increase your deferred pension at higher rates than the minimum rates specified in law.
Where can I find out more?
If you need more information, please contact us. A pension specialist from our team will be happy to help with whatever pensions-related question you have. Our help is always free.