“Saving for a pension is hard, but retiring without a pension is a lot harder.”

Source: Steve Bee, 25 January 2015

Preserved Pensions also known as ‘Frozen Pensions’ can be a significant part of your retirement planning - get an expert view on your options going forward.

Why is it important to keep track of your overall Pension planning –

Like many U.K adults, you may have had several jobs and occupations, employed and/or self-employed before your current occupation. Therefore, it is likely that you have accrued pensions from those previous jobs and may have lost track of this historic retirement planning. If so, we would always suggest revisiting this previous planning and take action now – review those old Pension plans, or potentially face some un-necessary stress and uncertainty when you approach retirement.

It’s vital to know about these ‘preserved pensions’, even if they’re small, as otherwise you won’t be able to work out your total pension savings or calculate your likely retirement income.

The plans may no longer have a suitable investment balance that currently reflects the correct attitude to risk for your present-day needs. Is your money invested in the correct funds? giving you the reassurance you require for the present and your future income and investment requirements?

Gain peace of mind knowing if you were ever contracted out of SERPS?

The State Earnings Related Pension Scheme (SERPS) was active between 1979 and 2016, enabling people to build up additional state pension. It was possible to opt out of this arrangement to try and build up better pension benefits using your National Insurance contributions. If you ever chose to opt out, you were 'contracted out' of SERPS, which means you may have additional pension pots as a result. 

Can I cash in a preserved pension from an old employer?

Assuming you are over 55 and your Pension is a defined contribution scheme, you could potentially cash in the pension pot, although the rate is rising to 57 in 2028. However, caution should be exercised, and you should seek advice on the best way to do this and even question if this is the best approach for you. Drawing a Pension can count as income, so if you cash in a large sum at once, you may lose a large amount of Pension capital to income tax. Retiring early is a big decision to make, so be sure to consult us before taking any non-reversable action that you may regret.

Does a ‘preserved pension’ still grow?

The short answer is most probably ‘Yes’. You should have seen the preserved pension over the years still organically grow. However, without regular additional contributions the rate of growth could be reduced as neither you nor your old employer will be contributing to the Pension. The Pension will also be affected by other factors such as fees, market conditions and investment performance, all potentially reducing the retirement funds you could be enjoying in retirement. 

What are my options for a ‘frozen pension’?

Leave the pension where it is – if the pension is still performing well and you have control of it, it will likely be wise not to move it. Additionally, some older pension schemes have valuable guarantees, enhanced tax-free cash or the potential of significant penalties if transferred. Without expert due diligence, guidance and advice these benefits could be lost and penalties incurred.

Release a lump sum – due to pension freedoms, you may be able to release a tax-free lump sum from your pension via flexible access drawdown or purchasing a guaranteed annuity, if you’re over 55 years old, although this will rise to age 57 in 2028. Subsequently, we can help you to access your tax-free cash. If ‘drawdown’ is right for you and your current pension doesn’t allow drawdown, we can explore the potential to move your pension to give you more flexibility. We would offer you advice on the best way of accessing your funds and highlight the impacts of what taking your money early could have on your future.

Why should you seek expert financial advice?

The above list is not exhaustive. There are many options you can take when looking at preserved Pensions and retirement planning in general.  A great deal needs to be taken into consideration, with it being paramount that we make sure that together, we get this right first time. We would welcome the opportunity to work with you, give us the chance to understand what it is that you want, what are your personal needs and aspirations, your attitude to risk and personal time horizons. We can then work with you, at your pace, working through all the options to help you make the right, tax efficient informed choices.

We have been helping and advising individuals, families and businesses make these financial decisions for over 27 years. Ensuring that the advice is right for you, first time and then ensuring that you have regular reviews to help keep your planning on track personally for you, year after year. Please feel free to get in touch, we look forward to being of service to you.

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is generally dependent on individual circumstances. 

Income Drawdown' will reduce the size of your pension fund and the investment growth may not be sufficient to maintain the level of income you wish to draw. If you withdraw money at a rate greater than the growth achieved by your investments your remaining fund will reduce in value. The level of income you take will need to be reviewed if the fund becomes too small - this is more likely the higher the level of income you take.