By Team SalaryCalculate · 9/23/2025
Redundancy doesn't just affect your immediate income - it can significantly impact your retirement planning. Understanding your pension options during redundancy is crucial for protecting your long-term financial security.
This comprehensive guide explains your redundancy pension options, from keeping your existing scheme to transferring to a new provider or considering early retirement.
Understanding Your Pension Rights During Redundancy
When you're made redundant, your pension doesn't disappear. You have several options depending on your circumstances and the type of pension scheme you're in. Use our redundancy pension calculator to understand exactly how redundancy affects your pension and what options are available to you.
Your key pension rights during redundancy include:
• Your pension continues to belong to you
• Employer contributions stop on your last working day
• You can continue contributing if the scheme allows
• You may be able to transfer to a new scheme
• Early retirement may be possible if you're over 55
Types of Pension Schemes
Understanding your pension scheme type is crucial for making the right decisions. The main types are:
| Scheme Type | How It Works | Redundancy Impact | Transfer Options |
|---|---|---|---|
| Defined Benefit (DB) | Guaranteed income based on salary and service | Benefits continue to accrue until leaving | Usually possible with advice |
| Defined Contribution (DC) | Pension pot built from contributions | Contributions stop, pot remains invested | Usually straightforward |
| Workplace Personal Pension | Individual pension with employer contributions | Employer contributions stop | Can continue or transfer |
| Group Personal Pension | Employer arranges personal pension | Employer contributions stop | Can continue or transfer |
| Auto-enrolment | Government-backed workplace pension | Contributions stop, pot remains | Can consolidate or transfer |
Option 1: Leave Your Pension Where It Is
Sometimes the simplest option is to leave your pension where it is. This might be the right choice if:
• You have a good defined benefit scheme with valuable guarantees
• You're close to retirement age
• You're unsure about your options and want time to decide
• The scheme has low charges and good investment options
Remember: your pension will continue to be managed by the scheme trustees, and you'll receive annual statements showing its value.
Option 2: Transfer to a New Employer's Scheme
When you find a new job, you may be able to transfer your old pension to your new employer's scheme. This can help consolidate your pensions and potentially reduce charges.
Consider transferring if:
• Your new employer's scheme has better benefits or lower charges
• You want to consolidate multiple pension pots
• The new scheme offers better investment options
• You want to simplify your pension management
Option 3: Transfer to a Personal Pension
You can transfer your workplace pension to a personal pension scheme (SIPP or personal pension). This gives you more control over your investments and potentially lower charges.
Benefits of transferring to a personal pension:
• More investment choice and control
• Potential for lower charges
• Flexibility to continue contributions
• Ability to consolidate multiple pensions
Option 4: Early Retirement
If you're over 55, you may be able to take your pension early. This can be attractive if you have enough savings to bridge the gap until state pension age.
Consider early retirement if:
• You have sufficient savings and other income sources
• You're ready to stop working permanently
• You have other retirement income (state pension, other pensions)
• You want to avoid the stress of job searching
Budget Planning Considerations
Your pension decisions should be part of your overall redundancy budget planning strategy. Consider how pension choices affect your immediate financial situation.
Key considerations:
• Early retirement reduces your pension income permanently
• Transfer charges may apply
• Tax implications of different options
• Impact on means-tested benefits
Understanding the Impact of Early Retirement
Taking your pension early has significant long-term implications. Learn more about the redundancy early retirement impact on your retirement income and how to make informed decisions.
Early retirement typically means:
• Reduced annual pension income
• Longer period without employer contributions
• Potential tax implications
• Impact on state pension and other benefits
Pension Transfer Options
If you decide to transfer your pension, understanding your redundancy pension transfer options is crucial for making the right choice for your circumstances.
Transfer options include:
• New employer's workplace pension
• Self-Invested Personal Pension (SIPP)
• Personal pension with a provider
• Consolidation with existing pensions
Getting Professional Advice
Pension decisions can be complex, especially with defined benefit schemes or large pension pots. Professional advice is often worth the cost for:
• Defined benefit transfers worth over £30,000
• Complex pension arrangements
• Multiple pension pots to consolidate
• Early retirement planning
• Tax planning implications
Frequently Asked Questions
Q: Can I access my pension immediately after redundancy?
A: Generally, you can only access your pension from age 55 (rising to 57 from 2028). Exceptions exist for ill-health or very small pots, but early access usually means reduced benefits.
Q: Should I transfer my defined benefit pension?
A: This depends on your circumstances. Defined benefit pensions offer valuable guarantees, so transfers are rarely recommended unless you have specific needs for flexibility or are in poor health.
Q: How long do I have to decide about my pension?
A: There's usually no rush. You can leave your pension where it is indefinitely while you decide. Take time to understand your options and get advice if needed.
Q: Will redundancy affect my state pension?
A: Redundancy itself doesn't affect your state pension, but periods of unemployment may reduce your National Insurance contributions. Check your state pension forecast and consider voluntary contributions if needed.
Your pension is one of your most valuable assets, even during redundancy. Taking time to understand your options and make informed decisions can significantly impact your long-term financial security.
Whether you choose to leave your pension where it is, transfer to a new scheme, or consider early retirement, the key is to understand the implications and seek professional advice when needed. Your future self will thank you for the careful planning.
