If you are a member of any pension plan set by your employer, the pension benefits only belongs to you. Even if you leave the job for any reason, no one else except you can claim the pension benefits. If you are thinking about what you can do with your pension contributions after leaving (not retiring) your job, then there are many options to make the most of your pension funds including:
1. Leave the pension as it is to get it at the time of your retirement
2. Continue to pay in your pension pot even after leaving the job
3. Getting it transferred to new schemes
4. Get the refunds of your contributions
5. Start getting your pension and its benefits
Let’s explore these options in detail separately however you are recommended to get in touch with your pension administrator to know about the applicable rules and regulations for each option.
1. Leaving The Pension As It Is
If you leave a job and do not join a new one, your pension pot will be frozen until you get retired. When you leave your pension pot without any further contributions, you may not be entitled to certain benefits. But you will still be eligible to get certain benefits such as death benefits or annual increments if you are under Money Purchase Scheme or Defined Benefit Scheme.
2. Continued Payments Into Pension Pot
If you continue to contribute towards your pension plan even after leaving the job, you are eligible to receive tax relief on the payments you make.
3. Transfer To New Schemes
The option of transferring your pension funds into new scheme is always available. You must seek advice from your financial adviser about best schemes suitable for your financial goals.
4. Getting Refunds
The option of refund is available if you have been a member of the pension scheme for a period less than 2 years. The refund option isn’t unavailable for retirement annuity, stakeholder pension or personal pension. When you get the pension refunded, taxes are deducted at following rates:
- 20% up to refund of £20,000
- 50% up to refund of over £20,000
The taxes are deducted before making your payments. No further tax will be applicable on the lump sum payment but you cannot reclaim the deducted tax.
5. Start Getting Your Pension
If you leave your job and start getting funds from your pension pot, you may be offered different options depending upon your pension scheme.
In addition to above options, there are some more options available when you leave your job under some special circumstances such as:
- If you leave your work because of illness, you may be allowed to get your pension funds immediately.
- If you leave your work and start getting state benefits like job seeker’s allowance, your pension normally won’t be affected at all.
It is advisable to contact your administrator of pension schemes before you make any decision. This is necessary because different schemes may have special rules that you are bound to adhere with.