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Quit your job to start your own business? Don’t leave your old workplace pension behind

Top tips for understanding your old workplace pensions, how to find them and your options for transferring.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Millions of people have seen their working lives transformed as a result of the coronavirus. Some people might have done some re-evaluating, and even given up their nine-to-five to become self-employed.

Becoming your own boss has lots of perks, but it also means your financial future rests on your shoulders. On top of managing all your business costs, you need to build up a retirement pot big enough to be able to fall back on in later life.

Worryingly, only one third of self-employed savers aged 35-54 have more than £25,000 in a pension – which is very unlikely to give you with a comfortable retirement income. Working for yourself means you don’t have the advantage of an employer’s workplace pension. Nor the contributions you’d receive from them or a HR department to set one up for you. Saving for retirement and managing your pension is solely your responsibility.

Here’s some top tips for understanding your old workplace pensions, how to find them and your options for transferring.

This article and guide aren’t personal advice. Pension and tax rules can change and any benefits depend on your circumstances. If you’re not sure what the best course of action is for your circumstances, please ask for advice.

What is a workplace pension?

To encourage people to save for the future, the government introduced auto enrolment. This means that employers have to enrol eligible staff into a workplace pension scheme and pay into it on behalf of their employees. An employee will also need to pay in a portion of their salary to benefit.

When you change jobs your workplace pension still belongs to you, but payment into the scheme will stop.

How to find lost workplace pensions

Whether you’re working for yourself now or not, people end up having a number of different jobs throughout their careers. For many, when they leave a job, they leave behind their pension too.

It’s estimated that there are around 1.6 million defined contribution pension pots worth roughly £19.4bn that are “lost”. That’s about £13,000 per pension pot – almost half of what some self-employed people have already saved.

If you’re not sure about your old workplace pension details, or you think you might have a lost pension in that £19.4bn pile, the government’s pension tracing service might help. You’ll just need to give them the name of your old employer.

More on the pension tracing service

The benefits of combining workplace pensions into one account

It goes without saying that things aren’t exactly normal at the moment. So paying into a pension might not be on the forefront of your mind – especially if you don’t have any spare cash. But that shouldn’t stop you from organising your old workplace pensions – you could give your investments more chance to grow without having to make a payment.

Having multiple pension pots dotted around with different providers can make it harder to keep track of how much you’ve got, what you could be on track to receive and where you’re invested.

Some older pension schemes also have limited investment choice. Transferring old pensions into a more modern pension that offers variety means more opportunities and possibly even better returns. Remember, investments rise and fall in value, so you could get back less than you invest.

By only needing to deal with one provider, it can even help you to free up some spare time – after all, running your own business often means that your time is money.

If you’re considering transferring, you need to be aware that pensions are usually transferred as cash, which means you’ll miss any market rises or falls for a period. You should also check that you won’t lose any valuable benefits or need to pay high exit fees before you apply to transfer.

More on transferring pensions

Get cashback if you transfer online

If you apply online and transfer pensions worth £5,000 or more, you’ll get cashback as a thank you for choosing us. The more you transfer, the more you receive. Act by 10 January 2021 to qualify. If you need more time to decide, let us know and we’ll give you an extra six months to transfer. To keep your cash back, all we ask is that you keep your pensions with us for a year. Terms apply.

Find out more

Where can I transfer my old workplace pensions?

Lots of people who work for themselves use a personal pension to save towards retirement. Two of the main options are a stakeholder pension and a SIPP (Self-Invested Personal Pension).

SIPP (self-invested personal pension)

SIPPs offer low and flexible minimum contributions, usually meaning you can stop and start payments based on how well your business is doing. They also typically offer a wide range of investments options – which could bring the potential for better returns.

Stakeholder pension

Similar to a SIPP, with a stakeholder pension you’re able to make small payments which are flexible. The main difference is they normally offer less investment choice.

Why choose the HL SIPP?

  • Free to set up – our yearly charge for holding investments is also only 0.45%. See our full list of charges, including dealing fees.
  • Wide range of investments – select your own investments, pick from ready-made portfolios, or pay for personal advice on where to invest.
  • Excellent customer service – our dedicated helpdesk are on hand to answer your questions no matter how big or small.

More on the HL SIPP

New to SIPPs?

If you’d like to find out more about how SIPPs work, or whether a SIPP is the right pension for you, download our essential guide. You’ll learn more about how they compare to a stakeholder pension, and how to get started.

Download guide

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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