Can pension provider insist I withdraw from scheme after changing jobs?

browny5678

Hi,

I've always thought that when you stop paying into a particular pension scheme when you change jobs, you have 3 choices, a) to keep the money in there and then decide what to do with it before retirement, b) withdraw the funds, and c) transfer funds to a different pension.

I've just had a letter from a previous pension provider saying that as I left the plan in 2018 (when I changed jobs), I can now either get a refund of contributions, or transfer to a different scheme, and if I don't indicate my preference then they will automatically refund me.

Are they able to do this, or can I reply and tell them I want to keep my money in their scheme? I appreciate that my understanding of how pensions work could be wrong, but I'm struggling to find an answer to this specific question on google (I might not be using the right search terms!)

Any advice appreciated.

Silvertabby

Is this the LGPS?

If so, then you have a 'frozen refund' record.  ie, you didn't meet the 2 year vesting period to qualify for actual pension rights, and so left with only the options of a refund (of your own contributions, less tax) or a transfer to another pension fund.

Under current rules the LGPS are only allowed to keep this record for 5 years, hence your recent letter.  As the transfer value will be way more than the refund, would transferring it to your current employer's scheme be an option?  Or could you open a new personal pension of some sort?

Even if it were possible to leave your benefits were they are until retirement, unless you re-joined the LGPS at some point, then you still wouldn't have any actual pension rights.  Just a refund by that stage.

Other pension schemes may well have similar rules.  

Andy_L

browny5678 said:

Hi,

I've always thought that when you stop paying into a particular pension scheme when you change jobs, you have 3 choices, a) to keep the money in there and then decide what to do with it before retirement, b) withdraw the funds, and c) transfer funds to a different pension.

I've just had a letter from a previous pension provider saying that as I left the plan in 2018 (when I changed jobs), I can now either get a refund of contributions, or transfer to a different scheme, and if I don't indicate my preference then they will automatically refund me.

Are they able to do this, or can I reply and tell them I want to keep my money in their scheme? I appreciate that my understanding of how pensions work could be wrong, but I'm struggling to find an answer to this specific question on google (I might not be using the right search terms!)

Any advice appreciated.

Depends on the scheme rules and, as SilverTabby said, how long you have been a member

browny5678

Thanks, it's not LGPS but I was paying in for <2 years, so I'm guessing there's a similar rule in place.

Annoyingly I'm due to change jobs again shortly, but have been paying into current pension for >2 years so will look into transferring to that or into a personal pension so I don't lose out.

Albermarle

browny5678 said:

Thanks, it's not LGPS but I was paying in for <2 years, so I'm guessing there's a similar rule in place.

Annoyingly I'm due to change jobs again shortly, but have been paying into current pension for >2 years so will look into transferring to that or into a personal pension so I don't lose out.

There are different types of pension. Most private sector pensions nowadays are DC (Defined Contribution) pensions. In this case the pension pot built up will just go with you, even if you have only worked there a few months.

In the public sector (and a few private sector companies) they have (much better) DB (Defined Benefit) pensions and these generally stay where they are when you leave, and some have this minimum two year rule.

Pension basics | Help with pension basics | MoneyHelper

NedS

If you are unable to stay a member of the scheme, it is always better to arrange a transfer of benefits to another scheme (maybe your current scheme). If you opt for a refund of contributions, they will only refund you your own contributions and all employer contributions would be lost - hence the benefit of transferring as the transfer value will reflect both the employer contributions and your own.

Sometimes you can get around the 2 year rule by transferring in benefits or maybe purchasing additional scheme benefits, but as you have already left, that will not be an option for you (but still worth knowing for future).

Marcon

browny5678 said:

Hi,

I've always thought that when you stop paying into a particular pension scheme when you change jobs, you have 3 choices, a) to keep the money in there and then decide what to do with it before retirement, b) withdraw the funds, and c) transfer funds to a different pension.

I've just had a letter from a previous pension provider saying that as I left the plan in 2018 (when I changed jobs), I can now either get a refund of contributions, or transfer to a different scheme, and if I don't indicate my preference then they will automatically refund me.

Are they able to do this, or can I reply and tell them I want to keep my money in their scheme? I appreciate that my understanding of how pensions work could be wrong, but I'm struggling to find an answer to this specific question on google (I might not be using the right search terms!)

Any advice appreciated.

If it's a defined benefit scheme then yes, they can do this. As others have already said, make sure you transfer within the permitted timeframe to get the benefit of employer contributions. Failing all else, pop it into a personal pension and move it at a later date if you want to.

Had it been a defined contribution scheme, then your '3 choices' would be correct.