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Last month the government announced plans to change the pension rules for workers who leave jobs within two years.

Currently workers who leave their jobs within two years of starting can be given a ‘short service refund’ of their pension contributions. Usually the person is given the choice as to whether or not the refund should be made, although employers may insist on the refund.

The new proposal is that refunds should only be available for those who have been in schemes for less than 30 days. The government is planning for the changes to take effect from October 2015. These proposals would only affect workplace defined-contribution schemes, not personal pensions or workplace final-salary schemes.

An estimated 20,000 workers a year, who move jobs within two years of service, are currently given a ‘short service refund’ of their pension contributions. The typical size of a pension pot when the refund is made is between £1,000 and £2,000, of which the employee contributions refunded to the employee is typically around £625.

Article shared from ACCA In Practice