What happens to your pension if your employer goes out of business

Any money you have in a pension is kept separate to your employer, so it shouldn’t be affected if they go bust or stop trading. 

What happens next depends on the type of pension scheme you have: 

1. A defined contribution pension (most newer pensions are this type) won’t usually have any more money paid into it, but your pension provider will continue to manage the money you’ve already paid in. 
2. A defined benefit (or final salary) pension will usually continue to pay out what it promised when you retire, or at least 90% of it. 

If you’re not sure what type your pension scheme is, ask your pension provider. 

For more information, see our full guide about workplace pensions. 

If you have a defined contribution pension and your employer goes out of business, they might not have paid all the money they should have into your pension. 

Ask you pension provider for an up-to-date statement to check your employer has paid into your pension each month, at least to the date it stopped trading. 

If there are missing contributions from your employer in the last year, your pension provider can usually claim compensation for you from the National Insurance Fund. 

To claim missing payments over a year old, you’ll usually need to contact the company that's managing your employer’s closure – often called an administrator.

What happens to your pension money depends on your pension type. 

If you have a defined benefit pension and your employer goes out of business, the Pension Protection Fund will step in to decide who is best to continue running it – this can take up to two years to complete.  

This means your pension will either be taken over by: 

• a new pension provider, or 
• an insurance company. 

If there’s not enough money in the scheme for someone else to run it, the Pension Protection Fund will pay you compensation payments instead.   

You’ll get 100% of what the pension scheme promised to pay if, at the time the employer went out of business, you were:  

• over your scheme’s retirement age (called your normal pension age) 
• already retired due to ill-health, or 
• receiving the pension from someone who had died (an inherited pension).  

Otherwise, you’ll get 90% of what the pension scheme promised in compensation payments.

If you have a defined contribution pension, you can either choose to: 

• leave it where it is until you start drawing money from it, or   
• transfer it to a new pension scheme, like one at your new job or one you set up yourself. 

The best option for you will depend on many factors, including how much money you have in your pension pot and the cost of each pension provider’s management fees.

For more information, including the pros and cons of bringing your pensions together, see our guide Making the most of your pensions.