Updated: June 18, 2019

Frozen Private Pension Options

Seeking expert advice is vital if you have a frozen private pension. Find out how to get it in our complete guide

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Tony Stevens

Author: Tony Stevens - Finance Expert

Updated: June 18, 2019

A frozen private pension (often referred to as a preserved pension) is a term used to describe a retirement savings scheme which is no longer receiving any regular contributions.

If you’ve migrated between various employers and job roles during your working life it’s not uncommon to possess any number of private pensions which have now become ‘frozen’.

Frozen private pensions can still make a valuable contribution towards your retirement income and this article looks at the options available to you for these funds:

Can I cash in a frozen private pension?

Yes, this is possible. However, it really depends upon the specific circumstances at the time which will determine whether this is the right decision for you or not. If you have a private pension which is now frozen there are three options available for you to consider:

  • Leave the private pension funds where they are
  • Switch the private pension funds into an existing scheme
  • Cash in the private pension funds and use them for retirement income

If my private pension is frozen should I simply leave the funds where they are?

This is definitely an option available to you. There’s a common misconception that any private pension which is now frozen will no longer be able to grow or accumulate any interest – this is incorrect.

Despite no longer receiving further payments, any existing funds held within a frozen private pension will still have the opportunity to grow in line with the performance of the underlying investments.

If these investments are performing well and in line with the strategy you have chosen then leaving the pension funds where they are may be the most viable option at that time.

You should receive statements illustrating the value of your pension funds on an annual basis and it’s important to regularly review how the investments are performing – this is where we can help.

The advisors we work with will be able to review all of your private pension arrangements – both existing and frozen – to ensure they are on track to deliver the income you need in retirement.

Can I switch all of the frozen private pensions I have into my existing plan?

Yes, it’s possible. If you have a number of frozen private pensions, the idea of merging all of them into a new scheme can be quite appealing. Having all of your plans under one umbrella can also make them much more convenient to manage.

Before making any switch it’s important that you’re comfortable with the benefits of your existing scheme and also happy with the performance of the underlying investments.

The administrators of your frozen and existing pension plans would need to confirm the viability of switching funds. There are certain circumstances where this would not be in the best interests of the pension holder (frozen NHS or teacher’s pension schemes, for example).

Switching pensions can be quite a daunting prospect as not only is it important to compare the features and benefits of each scheme but also the effect any new charging structure could have on the overall value of your fund if you decide to transfer.

The advisors we work with will be able to help you compare the merits of each pension so you can decide whether switching everything into one plan is the best option for you in the long term.

When can I cash in my frozen private pension funds for retirement income?

The rules regarding when you can access your pension funds in order to convert them into retirement income remain the same, even if the scheme is frozen. Typically, the earliest age you can access private pension funds is 55. Certain schemes will only allow access to the pension benefits once you reach the nominated retirement age (a defined benefit scheme).

Accessing your frozen private pension funds before the age of 55 will be classed as an unauthorised payment and could result in HMRC levying a large tax penalty (usually equivalent to 55% of the fund value).

There are two instances, however, where you could access the funds before you reach normal retirement age:

  • Long-term ill-health or diagnosis of a terminal illness
  • Your scheme has a protected retirement date

If you’re no longer able to work due to ill-health or disability it is possible to convert your plan to an ill-health pension and commence taking the benefits at that point. Upon diagnosis of a terminal illness it is possible to receive the pension benefits as a tax-free lump sum.

Pension plans with a protected retirement date were available before 6 April 2006 and typically used by someone who’s profession would normally result in a retirement age below 55. These plans were particularly attractive to professional sports people, for example.

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Frozen private pension – should I seek advice?

Yes, definitely. Regardless of which of the above options best suits your circumstances it’s really important to seek the advice of a professional pensions advisor in the first instance so they can offer the appropriate guidance and ensure you make the right choice.

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If you have a frozen private pension it’s important to be aware of its potential to still grow and add significant value to your overall retirement goals.

The advisors we work with are all independent financial advisors. They will be able to offer you their knowledge and expertise so these funds can help you achieve the income you need in retirement. Call us on 0808 189 0463 or make an enquiry for a free, no-obligation chat and we’ll match you with one of the pension experts we work with.

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We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions Ask us a question and we'll get the best expert to help.

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Tony Stevens

Tony Stevens

Finance Expert

About the author

Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

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