What Happens to your Pension if your Circumstances Change?

What Happens to your Pension if your Circumstances Change?

When planning for your future, things may not always go as planned and an unforeseen change in your circumstances can have an effect on your financial situation and your pension. Changes in your circumstances may include redundancy, divorce or parental leave. If unplanned changes do arise it is important to seek financial advice as soon as possible to ensure your pension plan adapts to the changes.

If your personal circumstances have changed or you are looking for independent pension advice in your local area, we can help you find the right pension adviser to help you with all aspects of pension planning and reviewing to ensure you have the most effective and efficient strategies in place.

Redundancy and your Pension

If you are made redundant your initial focus will be on finding a new job, and while you may receive a redundancy payment to help you cope financially, it can be a stressful time. If you are made redundant you will have several options with your pension, including:

  • You may be able to transfer your pension to a new scheme
  • You may be able to leave your pension in a workplace scheme and continue to make contributions
  • You may be able to use some of your redundancy payment to make additional pension contributions, this is known as a redundancy sacrifice

Before you make any changes to your pension when being made redundant it is advisable to seek independent pension advice to ensure you are making the best decision for your personal circumstances. If you decide to make additional payments into your pension, it could take you over the annual allowance and be subject to tax. An independent pension adviser will be able to provide advice on this.

Divorce and your Pension

While your pension may not be the first thing on your mind when divorcing your spouse, it is good to understand how your pension could be affected. As pensions can be included as assets in divorce financial settlements, it is imperative you have a good understanding of your pension entitlements and how they could be affected.

Without a good understanding of how your divorce might impact your pension, you could find your pensions benefits have decreased from what you expected to receive when you come to retire. It is good practice to seek independent pension advice if you are faced with a change in circumstances such as divorce.

Parental Leave and your Pension

If you decide to take maternity leave, paternity leave or adoption leave, you should remain a member of your workplace pension and contributions will be continued to be made by yourself and your employer. However, if you choose to stop your contributions, your employer’s contributions will also stop and you will be treated as having left the scheme.

If you are a member of a defined benefit pension scheme or a defined contribution pension scheme, periods of paid parental leave are treated as pensionable service and you will continue to accrue pension benefits. Your employer’s contribution should remain the same as before your parental leave, but member contributions will be based in actual earning during parental leave.

Extended parental leave that is unpaid doesn’t count as pensionable service, but you should have the option to make additional contributions when you return to work to cover this period where you were not contributing.

If you are planning on taking parental leave either paid or unpaid, it is advisable to seek independent pension advice so you are clear on any effects this may have on your pension pot and the options available to you under the rules of your pension scheme.

The financial advisers we recommend are experienced in retirement planning and regularly work with their clients to provide independent pension advice across the UK. Our financial advisers will work with you to determine which pension plan is best suited to your circumstances and can provide advice to overcome changes in your circumstances.

At PensionAdvice.org we can help you find a FCA registered financial adviser for independent pension advice in your local area. All of the financial advisers we recommend offer bespoke financial advice that is tailored to your unique personal circumstances.


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