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Frozen Pension FAQs
How do I find a frozen pension?
Over a long working lifetime it can be easy to lose pension documentation. Company name changes, takeovers and transfer of funds away from the original provider can further complicate the situation. Fortunately there are two websites which allow you to trace the administrators of a pension scheme if you are able to provide some basic details and your national insurance number. One is Government backed https://www.gov.uk/find-lost-pension the other is supported by the pension industry https://www.gov.uk/find-lost-pension
What happens to paid up pensions?
The average employee may collect several frozen (paid up) pensions during a working lifetime as they move between employers. Some of these schemes may be defined contribution, others may be defined benefit.
Although you are unable to continue to pay into (most) a frozen pension the pension fund will continue to grow. The pension fund is still yours so it is important to check it continues to grow at least in line with industry averages and that there are no high charges that will significantly deplete the available pension fund at retirement. You may want to take advantage of one of our free pension reviews.
How do I unlock a frozen pension?
The first important point to note (unless their are special circumstances) you must be at least 55 years of age. Secondly, it is vital to check that you will not lose valuable benefits if you transfer out of the frozen (paid up) pension scheme.
If you are over 55 and wish to access your frozen pension you may transfer your workplace (frozen) pension to a personal pension plan. From this point there are a number of options available to you including leaving the fund invested, entering pension drawdown or purchasing an annuity. Be aware it is likely there will be charges associated with making the transfer from your frozen pension and you should check these charges are reasonable and, when imposed, make the transfer a sensible option.
Beware of the term pension liberation. This tends to be associated with schemes that offer to access a pension before age 55. This is a scam that will result in very high fees and a tax bill from HMRC for 55% of the fund value when you are caught.
Does a frozen pension still grow?
Frozen (correct term “paid up”) pensions do continue to grow, the issue is at what rate. The term “frozen” simply means that payments may no longer be made into the pension fund, the fund itself should continue to grow.
It is important to note there are well managed pension funds that continue to grow at or above the industry average and there are funds that do not grow so well, if at all. Some pension funds have fees applied that are at (or below) industry averages while others have significant fees that will have a serious impact on the final value of the fund. It is therefore vitally important to carry out a review of your frozen pension performance and fees.
Can I cash in a Frozen pension?
If you are over 55 years of age it is possible to cash in a frozen pension. You may take up to 25% of the fund value tax free if you wish and invest the balance in an annuity, in an alternative pension scheme (known as pension drawdown), or both. Alternatively, you may cash in the entire fund but tax will be payable on anything over the tax free amount.
It is important to check exactly what benefits you may be giving up before cashing in a pension and to make an informed decision. It is also important to check the fees that will apply as in some cases these can be significant.
Can I cash in a frozen pension prior to 55?
No you cannot unless there are special circumstances (for example ill health). You may have noticed many offers online and/or telemarketers claiming it is possible to cash in prior to 55 but these are scams.
If you do cash in prior to 55 years of age you will most likely pay very high levels of fees and when you are caught by HMRC they will apply a punitive tax rate of 55%.