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Leaving a scheme early

On leaving employment before retirement age, there are a number of options depending on what kind of pension scheme it is and how long you have been a member.

Defined Benefit and Occupational Money Purchase schemes

Members with two or more year’s service will usually have the following options:

  • A deferred pension – the pension rights built up so far remain invested in the scheme until retirement age.
  • A transfer payment into another registered pension scheme.

Members with between three months and two years service will usually have the following options:

  • A refund of the individual’s own contributions (minus tax).
  • A transfer payment into another registered pension scheme (including the value of contributions made by the employer).

Members with less than three months service will usually automatically be given a refund of their own contributions (minus tax).

Refunds

If an employer has introduced ‘salary sacrifice’ arrangements where the member does not make their own contribution then the option of a refund is sometimes no longer available.

Also, refunds cannot be paid when a member has transferred pension rights over from another pension scheme.

Early retirement

Pension scheme members who are age 55 or over may be able to start receiving their pension immediately on leaving their employment.

This is usually subject to the approval of the pension scheme trustees and the employer.

Pensions paid early are usually reduced because they will be paid for longer.

Group Personal Pensions and Stakeholder Pensions

Members of Group Personal Pensions or Stakeholder Pensions have the following options:

  • Stop paying into the pension and leave the money built up so far invested until retirement age.
  • Carry on paying into the pension either on a regular basis or just occasional one-off payments.
  • Use the money built up so far to provide immediate retirement benefits (if age 55 or over).
  • Transfer the money built up so far into another registered pension scheme.

There is no refund option on leaving a Group Personal Pension or Stakeholder Pension.