What happens to your pension when you start a new job?

The quick and easy answer is: nothing will happen to your existing pension, or pensions, when you start a new job. And the good news is, your new employer is legally obliged to automatically enrol you in their workplace pension scheme, as long as you meet a couple of requirements. This essentially means more free money for your retirement pot.

While nothing happens to your existing pensions when you start a new job, switching employers is a good opportunity to review what you’ve got. It could be there is a much better pension deal out there for you.

What pension should I get when I start my new job?

If you are 22 or over and earning £10,000 or more per year your new employer must automatically enrol you in their workplace pension scheme. The minimum contribution is 8% of your salary:

• Your employer contributes 3%
• The remaining 5% is covered by a contribution from your salary and any tax relief you are entitled to

The rules around workplace pensions are governed by auto enrolment legislation, which came into force in 2012. And it’s this legislation that is helping to transform people’s savings plans:

• People are much less likely to opt out of something than opt into it, which makes auto enrolment such a powerful device
• Your contribution is taken from your pay packet before it hits your bank account, making it easier to get into the savings habit
• Your employer must contribute a minimum of 3%, which is essentially free money on top if your pay packet

Can I transfer my new workplace pension to an existing scheme?

Generally, while you can opt out of a workplace pension scheme (and therefore auto enrolment), you cannot ask for payments into your new workplace scheme to be paid into another existing pension instead. And by opting out of your workplace scheme you will be giving up the minimum contributions your employer has to make by law. And who wants to give up what is effectively free money from their employer?!

Can I transfer existing pensions into my new workplace scheme?

This really depends on the rules of your workplace scheme. In many cases you can. Whether you should do or not depends on several factors for each scheme including:

• How much you are being charged
• Performance history
• How your pension savings are invested
• How your scheme is being managed
• What, if any, guarantees exist

Then there’s the benefit of having all your pension pots under one roof. While this usually means admin is easier for you and can make financial sense, you should ask an independent specialist to review your pensions before making any final decisions.

I’m starting a new job: why should I also review my pension arrangements?

Starting a new job generally means a change to your financial situation. On top of this, it’s very likely that you’ll be getting a new workplace pension scheme. As a result, it makes sense to review all your pensions, to make sure you are getting best possible value for the money you are putting into your pension. Three of the biggest issues affecting pensions are:

High charges

How much you pay for your pension can vary wildly. And over time, what seems like a small difference can have a significant effect.

Poor performance

The right mix of pension investments depends on how and where your savings are invested. And the right mix for you depends on your circumstances, your attitude to risk and how long you have left until you plan to use your pension. This means that just because the average performance of your pension is higher than a friends, for example, it doesn’t mean their scheme’s performance is poor. They might simply be prepared to take less investment risk than you. However, as with all products, there are great pensions and some absolute stinkers out there. And if your money is invested in an old, lazy scheme you could be missing out on a significant amount of growth.

Lack of management

The right type of pension and investment mix for you depends on many variables. And over time these variables change: from your attitude to investment risk to how and when you need to withdraw your pension savings. On top of this, new pension products can quickly mean that today’s top performer is tomorrow’s has-been. The best way to make sure your pension remains tailored to you throughout your life is to regularly review it. Or, ask a regulated pension specialist to manage your pot for you, as long as that management includes reviews every year as part of that service.

How do I review my pension?

Ask a regulated financial adviser to review your pension. You should be looking for a financial adviser that:

• Is regulated by the Financial Conduct Authority
• Specialises in pensions
• Will review your pension for you without charging a fee upfront