Frozen Company Pension - The Options!
You can hardly have failed to notice that the prediction for UK
pensions is not good. Like many European countries, the UK has
an aging population and a decreasing birth rate. Whilst the
workers are currently funding the old aged pensioners, it
remains unclear how the next generation of old aged pensioners
will be funded. Simply put, we are getting older and the pension
scheme currently in place is not able to accommodate this. As
society's attitude towards work has also undergone a major
transformation whereby a job for life no longer seems to be the
norm, the number of employees with a frozen company pension
scheme is also on the increase. In fact, many people are
changing their job so often that they have accumulated a number
of frozen company pensions. So, what are the options available
for those with a frozen company pension? Pension plans can
become frozen if you have been part of a company pension plan
and you then decide to leave the company. Normally this happens
when you have been working for the company for two years. This
pension plan is known as a frozen company pension as you are
unable to then pay any contributions into it. If you have a
frozen company pension you will not be able to simply draw money
out of it as the money will have be paid before tax. This means
that the Inland Revenue have strict regulations as to how to
deal with a frozen company pension. Although this may seem as
though it is fairly final you will still have a few options
available to you. These frozen company pensions options can be
summarised as follows:
*Transferral - Transfer the frozen company pension to another
company pension scheme. Allowing you to then make new
contributions *Acceptance - Leave the frozen company pension
with your previous employer and accept that you will not be able
to pay into it again *Conversion - Convert the frozen company
pension over to a Personal Pension Plan, allowing you to start
making contributions again *Buy Out - Transfer the frozen
company pension to a Section 32 Buy Out Policy
It is always advisable to discuss these four options in more
detail with a financial adviser to ensure that you are
fully-informed about your future possibilities for your frozen
company pension. By having a full understanding of the
implications of freezing plans and investment approaches when
evaluating the requirements of a frozen company pension plan,
you can rest assured that you will be making the best decision
for your retirement.