Workers who leave their employer after two years will no longer be pushed into withdrawing their pension contributions, pensions minister Steve Webb has announced.
From next October, the government will abolish short-service refunds ensuring money saved into a pension scheme stays in the pot and is invested for it intended purposes.
Under the current system, a member of a workplace pension scheme who leaves having completed more than three months but less than two years of qualifying service can receive a short-service refund. Sometimes this is optional, while in other cases an employer may insist on the refund being taken or a transfer being made to another scheme.
But under the new rules proposed by Webb, schemes would only be able to make refunds within the first 30 days of membership. Defined benefit workplace schemes and personal pension schemes will not be affected.
Webb said the average Briton has 11 different jobs in their lifetime and 'we need the rules to reflect this reality'.
'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.'
