The UK government is currently looking at making it simpler for employees to take their pensions with them as they switch one job to another. A clear system is expected to be developed in which individuals with small pension funds can carry forward their pension plan when they switch jobs.
But these are still in the process and yet to be implemented; the current pension rules does not allow individuals to combine their pension funds as they move from job to job during their working years. These results in frozen pension pots or lost money. Many may end up with multiple pension funds stuck in different pension plans.
There may be a number of reasons for having frozen pension pots including change of a job, change in marital status, change in financial circumstances or probably it is redundancy that you stopped making contribution in to your pension pot. Such types of left out or locked pension funds are called paid up pensions. Some people also refer to it as frozen pension or dormant pension funds.
No matter what you call it, your pension funds will keep going reducing in its value each year if you leave it as is. This is mainly because of two reasons:
1. High charges levied by the pension providers. Your service provider can charge as much as 3% over your total fund each year.
2. It might be the case that your pension fund is invested in stocks and shares and due to bad investment performance, your funds have remained at a same or lower value.
What To Do
There may be a huge amount locked in your frozen pension or paid up pension pots and you should not leave it ignored.
You may get in touch with experienced financial advisers who could help you track all (if you have multiple pension plans) your frozen pots. Even if your pension funds have been frozen by your employer because of no further contributions, change in job or migration to other countries, the option of getting your funds transferred to other schemes and bonds may still be open for you.
You may again take assistance from qualified financial advisers to suggest you the right kind of investment schemes or bonds so that you get maximum benefit from your pension. It is always good to look at the many options available for you. For example, if your pension fund is evaluated at £50,000, you will get about £40 / week according to current rates of annuity – ask yourself, would this amount be sufficient for you and your dependents during the time of your retirement?
If you think this amount is not sufficient, then it perhaps is the right time to consider other options. You can transfer or move your pension fund to different plans that offer better returns on your funds.
An expert’s advice can help you select the most suitable scheme for you depending upon your current circumstance. So, do not ignore your frozen pension funds or paid up pensions, as it always pays to keep looking for better options.