What happens to your pension when you change jobs?

Your pension does not normally disappear when employment ends.

But the options depend on:

• the type of scheme;
• how long you were a member;
• the scheme rules;
• whether the benefit is preserved;
• and where you want the retirement money to live next.

The mistake is to treat an old pension as “finished” simply because the job ended.

The three broad options

The Pensions Authority describes three main possibilities when leaving employment:

The best option is not automatically “transfer everything”.

Preserved benefits

If you leave an occupational pension scheme with more than two years’ qualifying service, you will generally be entitled to preserve the benefit.

For a DC scheme, that normally means the accumulated value of contributions remains invested for you.

For a DB scheme, the deferred benefit is calculated under the scheme rules and pension legislation.

That DB promise can be valuable and should not be transferred casually.

Less than two years in the scheme

With less than two years’ qualifying service, some occupational schemes may require or permit a refund of your own contributions rather than preserving the full benefit.

The exact treatment depends on the scheme.

A refund can also involve tax.

If you are leaving a job early in scheme membership, ask the administrator for the written leaving-service options before deciding anything.

Transfer options

Where a preserved benefit can be transferred, possible destinations can include:

• a new employer’s pension scheme;
• a PRSA;
• a buy-out bond / personal retirement bond;
• another permitted pension arrangement;
• or, in certain circumstances, an overseas pension arrangement.

Not every destination is available in every case.

Leaving the pension where it is

Advantages can include:

• no immediate transfer decision;
• retention of existing scheme pricing;
• retention of valuable DB rights;
• access to institutional fund charges;
• and avoiding unnecessary transaction or adviser costs.

Disadvantages can include:

• another account to track;
• limited investment choice;
• old contact details;
• forgotten beneficiaries;
• and difficulty seeing the full retirement picture.

Leaving it alone is a valid decision if you understand the arrangement.

Moving to a new employer’s scheme

Consolidation can make administration easier.

Potential advantages:

• fewer pension pots;
• one investment strategy;
• easier beneficiary administration;
• simpler retirement planning.

But compare:

• charges;
• fund range;
• guarantees;
• normal retirement age;
• death benefits;
• and scheme rules

before moving.

A cheaper-looking destination can still be worse if valuable benefits are lost.

Transferring to a PRSA

Revenue allows occupational pension benefits to be transferred to PRSAs, subject to the relevant rules.

A PRSA can be attractive because it is personally owned and portable.

The Pensions Authority states that PRSAs can normally move between providers without transfer charges.

But do not transfer solely for convenience.

Check:

• total PRSA fees;
• investment range;
• advice costs;
• any guarantees being surrendered;
• and retirement implications.

Buy-out bonds

A buy-out bond, also called a personal retirement bond, can receive a transfer from an occupational pension scheme.

It separates the pension from the former employer while retaining it as a retirement arrangement.

Its value depends on the contract, charges and investments.

It is one possible destination, not a default answer.

Defined benefit transfers need extra caution

A DB pension promises future income.

A transfer value converts that future promise into a capital amount.

That moves investment and longevity risk from the scheme to you.

Before transferring a DB benefit, understand:

• the pension being given up;
• spouse/dependant benefits;
• inflation/revaluation;
• retirement age;
• transfer value assumptions;
• and what future investment return would be required to replace the promise.

This is an area where regulated advice can be particularly important.

What should you receive when leaving?

The Pensions Authority says trustees have information obligations when members leave.

Keep copies of:

• leaving-service statement;
• preserved benefit details;
• transfer value quotation;
• scheme booklet;
• latest benefit statement;
• fund values;
• normal retirement age;
• beneficiary nomination;
• administrator contact details.

Do not rely on being able to reconstruct all of this twenty years later.

Old pensions: build a pension inventory

Create one retirement inventory.

For each pension, record:

This turns several forgotten pensions into one retirement plan.

Should you consolidate?

Consolidation can be useful when it:

• reduces cost;
• simplifies administration;
• improves investment choice;
• makes retirement planning clearer.

It can be harmful when it causes you to give up:

• guarantees;
• valuable DB benefits;
• favourable charges;
• protected retirement ages;
• or other scheme-specific rights.

The word “consolidation” sounds tidy. The economics matter more than tidiness.

What happens to a PRSA when you change jobs?

A PRSA is portable.

You can normally continue the same PRSA after changing employment, changing to self-employment or moving between employers.

That is one of its defining features.

A new employer can potentially contribute to the same PRSA if the arrangement fits payroll and pension rules.

Frequently asked questions

Do I lose my pension when I leave a job?

Normally no. Depending on service and scheme rules, benefits may be preserved or transferable.

Can I transfer an old workplace pension to a PRSA?

Often yes, subject to the pension rules and the nature of the benefit. Compare what you give up before transferring.

Should I combine all my old pensions?

Not automatically. Consolidation can simplify things but may sacrifice valuable benefits or pricing.

What is a preserved pension?

It is a benefit retained in an occupational pension scheme after you leave employment, to be paid later under the scheme rules.