Your Pension When You're Made Redundant — What Happens and What to Do

Redundancy is stressful enough without worrying about what happens to your pension. The good news: your pension savings are yours and can’t be taken away. But there are decisions to make — and mistakes to avoid — in the weeks after redundancy.

What Happens to Your Pension When You Leave

When your employment ends, the following happens automatically:

Your pension savings belong to you from the moment they’re paid in (in modern auto-enrolment schemes). Redundancy does not affect ownership.

Employer Contributions — The Vesting Question

For most workplace pensions set up under auto-enrolment rules, contributions vest immediately — meaning they’re yours from day one.

However, some older occupational pension schemes (particularly defined benefit final salary schemes) have vesting periods. If you leave — or are made redundant — before the vesting period, you may receive:

Always check your pension scheme rules if you have an older or defined benefit pension.

Defined Contribution vs Defined Benefit Pensions on Redundancy

Defined Contribution (DC) Pensions

Most workplace pensions today are defined contribution — your and your employer’s contributions build a pot that is invested. On redundancy:

• The pot is yours
• It stays with the current provider (unless you transfer)
• You can continue contributing as a personal pension
• The pot grows or falls based on investment performance

Defined Benefit (Final Salary) Pensions

Older occupational pensions that promise a specific income in retirement. On redundancy:

• You get a deferred pension calculated at the point you leave
• The pension is revalued (usually in line with CPI) until you retire
• You cannot make further contributions to this scheme
• Transfer values require careful consideration; advice is legally required for DB transfers over £30,000

Redundancy Pay and Pension

Statutory redundancy pay is not pensionable earnings — you cannot put it into a pension and receive employer contributions match on it. However:

• You can contribute your redundancy lump sum to a personal pension or SIPP
• You receive tax relief on contributions up to your annual earnings (in the tax year of redundancy, this includes your salary earnings up to the redundancy date)
• The annual allowance is £60,000 in 2026/27 — most people won’t exceed this even with a large redundancy payment

PILON (Pay in Lieu of Notice) is treated as earnings and counts toward pensionable pay for that year.

Continuing Pension Contributions Between Jobs

If you’re between jobs after redundancy, you can still contribute to a pension:

What to Do With Old Pension Pots

Once you’ve left an employer, you’ll typically have options:

Before Consolidating, Check For:

• Guaranteed Annuity Rates (GARs) — old pensions may offer guaranteed income rates far better than current market rates; these are lost on transfer
• With-profits bonuses — terminal bonuses may be reduced on transfer
• Defined benefit benefits — never transfer without regulated financial advice
• Exit charges — some older policies charge 1–5% to transfer out

Finding Lost Pensions After Multiple Jobs

If you’ve had several employers, you may have lost track of pots. Use the Pension Tracing Service:

1. Visit gov.uk/find-pension-contact-details
2. Enter your former employer’s name
3. Receive contact details for the pension scheme
4. Contact the scheme with your NI number and employment dates

The Pensions Dashboard (being rolled out from 2026) will eventually show all your pensions in one place.

What Not to Do

Related Guides

• Redundancy Financial Recovery Guide
• Pension Consolidation Guide
• How to Find a Lost Pension
• SIPP Guide
• Pension Access Age 57 from 2028
• Workplace Pension Guide