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Frozen Pension Guide

Frozen Pensions

Rather than growing like a delicious loaf of bread in the oven, a frozen pension remains dormant, potentially not rising to its full potential. If you are confused already, we have put together this guide to hopefully help you make some sense of frozen pensions/ dormant pensions, as well as what you can do to maximise their performance. 

What is a Frozen Pension 

A frozen pension, also known as a preserved pension, is an old workplace pension which you are no longer making contributions to. If you have changed jobs multiple times over your career, there is a good chance that you will have built up a collection of frozen pensions. It is worth tracking these down, as in many cases they can be consolidated to improve performance, meaning more money for you to enjoy in retirement. Not only that, but from a planning perspective, it is helpful to know what money you have and where it is. 

What Happens to a Frozen Pension  

The short answer is that nothing happens to a frozen pension. It sits there waiting for you to turn 55 so you can access it. When you finish working your pension automatically becomes frozen, this means you will no longer be able to add to your pension, but the amount will grow through investment. If you have pensions from previous employment then we would advise you to integrate them into a plan so that they will perform better. 

How do you track down a pension? 

If you have misplaced your documents and are now panicking thinking that you have lost all of your old pensions, don’t worry because they will still exist and you can still find them. This is also something that we can help you with. There are a few ways in which you can track down your ‘lost’ pensions. If you contact your former workplace the HR department should be able to provide you with details of the company plan. It will then be up to you to contact the provider directly to find out the value of your pension.

Frozen Pension Guide

Frozen Overseas Pensions 

You are entitled to your frozen pension if you are a UK pensioner who has retired overseas in specific countries. These countries include:

  • Australia
  • Canada 
  • South Africa 
  • New Zealand 

The frozen pensions work exactly the same as they would in the UK, they will stay frozen at the level when you left the country, this means that payment will not rise in line with the cost of living.   

What Frozen Pensions Charges Will I Have to Pay? 

If you decide to consolidate all frozen pensions into one then you will be required to pay an exit fee to the dormant pension provider. A fee will be deducted from your pension as an exit fee, this may be a flat fee but mostly is taken as a percentage of the fund. We would always suggest looking into how much will be charged before going through with the transfer.  

Can I Cash in a Frozen Pension

If you are over the age of 55 and your pension is defined contribution, then you can access the pension amount in the same way as any other pension. This means that you can withdraw from the pension as a cash sum, but you can only do this if the pension amount is small. You can talk to our team who will put you in touch with the right people to help you with the best way to do this. It’s also worth considering that if you drawing out your pension then that counts as income. So this may have effects on your income tax if you were to cash out a large sum at once.

Frozen Pension Guide

Can I Release my Frozen Pension 

It is possible to release cash from a frozen pension if you are in a defined contribution scheme. If you have joined another scheme and are happy with all aspects of it then you can release any frozen pension fund you previously contributed to and then transfer them to your current scheme.

You will of course need to check with both of the administrators about their schemes to see if that is possible. It’s also worth considering if you were to do this then you may receive fees or charges that have a value of your frozen pension fund. We recommend that you explore every possibility such as making sure that it is possible to transfer your frozen pension. If you need professional advice about this or the daunting aspect of financial planning then make sure to get into contact with Your Options today!

Can I Sell my Frozen Pension 

There are many companies out there that advertise ‘sell your pension for cash’. We would advise strongly against this. As this is not possible and is likely a scam. We recommend that you really do your research in this area and speak to a pension advisor.  

Your options  

We understand that there are many different options when it comes to frozen pension advice. Our team give you options and help you find the best person who can assist you with your individual requirements. Call our team today on 01422 897808 or fill in our contact page.

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