People who change jobs regularly will no longer have to cash in or move their workplace pension, under new government proposals.
Currently members of workplace defined contribution (DC) pension schemes are able to cash in their contributions if they have been working for an employer for more than 3 months but less than 2 years. This is known as a short service refund.
Taking a short service refund is sometimes optional but employers can insist on leaving employees taking a refund or transferring their savings.
Under new plans to be introduced from October 2015:
- employees will no longer be able to take short service refunds from DC schemes
- members of defined benefit and occupational schemes will not be affected
- a short service refund will still be permitted if the employee leaves within the first month.
The move is designed to help ensure that money saved inside a pension scheme remains invested for the future.
Pensions Minister Steve Webb said:
“If people change jobs regularly and ‘cash out’ their pension each time, they stand no chance of building up a decent pension pot. By abolishing short service refunds and developing plans for automatic transfers to help people keep track of their savings, this government will build on its excellent record of helping millions of people save more for a brighter, more comfortable retirement.”