What to do with a ‘frozen’ pension from an old job

If you’ve had any jobs before your current one, the chances are high that you have pensions from those jobs. You may already have transferred those old pensions to your current one, or you may be happier leaving it where it is. But what if you’ve lost track of one or more pensions altogether? Or can’t remember if you have them or not? Then it’s time to take action now, or else face a lot more stress when you approach retirement.

How do I find out if I have a pension from an old job?

Around one in ten people have a pension from a previous employer that they’ve forgotten about or lost touch with. It’s vital to know about these, 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. You can track down any ‘lost’ pensions using the Pension Tracing Service (call 0845 6002 537). This service is provided by the government and is free – beware the many imitators who advertise under similar names, as they will charge and may also defraud you.

You will have to provide the name of your past employer(s) to the Pension Tracing Service, and they will attempt to identify the pension scheme(s) to which you may have belonged. However, this service cannot confirm whether or not you were in fact a member of a scheme. Instead, they will provide you with contact details for that scheme’s administrators (usually a postal address) and it will be up to you to contact the scheme in writing, to ask if you have any benefits still held in the scheme.

As you can see, it can be a long and drawn-out process, which is why it is best to sort this out well in advance, and not on the verge of retirement when you are in immediate need of extra money.

Check: were you 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 (to try and build up better pension benefits using one's 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. Find out more about these.

What happens to my pension when I leave an employer?

When you leave an employer, you need to take account of what will happen to your pension. This will depend both on the kind of scheme the previous employer uses, and what kind of scheme your new employer uses.

If both your current employer and your next employer use NEST

If both your present and your future employer use NEST (the government-backed workplace pension scheme) then it’s very easy. Your new employer will simply re-enrol you in NEST and you can carry on paying into the same pension pot. All you will have to do is submit a new enrolment form to NEST.

If your current employer uses NEST but your new one doesn’t

If you already have NEST pension but your new employer uses a different pension scheme, you usually have two options. You can leave your NEST pension where it is, where it will continue to be managed, and you can even continue to make contributions to it. Alternatively, you can transfer the money from your NEST scheme to your new employer’s scheme. However, if your new employer uses a defined benefit scheme, you won’t be able to do this.

If your current employer doesn’t use NEST but the new one does

You can transfer any existing pension savings from a defined contribution pension into a NEST scheme, or leave them where they are. Check to see if your current pension comes with any guaranteed benefits, as these may be a reason not to transfer. You can’t usually transfer a defined benefit pension into NEST.

If both your current employer and your next employer use their own pension schemes

You can transfer any defined contribution pension scheme into another – ask your new employer about this. Again, if your new employer uses a defined benefit pension scheme, you can’t transfer other benefits into it (you simply keep both pensions separately).

You can sometimes transfer a defined benefit pension into a defined contribution pension. However, the law requires you to seek advice on transfers valued at £30,000 or more.

If you use a personal pension

Some employers will agree to make contributions into your own personal pension, instead of their workplace scheme. This may be more convenient for you, particularly if you change jobs a lot. However, your employer’s scheme might be better, so do check to make sure you aren’t missing out.

What is a frozen pension?

‘Frozen pension’ is an informal term often used to describe a workplace pension from a previous employment, into which you no longer make contributions. They’re also (more accurately) known as preserved pensions, but when you hear someone talking about a ‘frozen pension’, this is usually what they mean.

Although you can no longer pay into this pension, the money in the fund will continue to grow and you will be able to access it as normal from the age of 55. The provider should continue to send you pension statements, but if you change address or if the provider changes, you may lose track of the pension and even forget it’s there.

The other meaning of ‘frozen pension’

The term ‘frozen pension’ can also mean something quite different. UK pensioners who retire overseas in certain countries (including Canada, South Africa, Australia and New Zealand) have their UK state pension frozen at the level it was at when they left the country, which means the payments will not rise with the cost of living. If you think this may affect you, talk to a financial adviser.

Where is my pension? (And can I leave it there?)

Once you’ve tracked down your old workplace pension with the help of the Pension Tracing Service, should you move it or leave it where it is? Bear in mind that your old pension may be in a fund that has higher administration charges and poorer performance than you could achieve elsewhere – in which case it may be better to transfer the money to your current workplace scheme or to a personal pension.

Should I combine my pensions?

Even if you know exactly where all your pension are and how much is in them, there is still the question of whether or not you should consolidate them all into one big pot. By doing so in advance of retirement you can avoid paying multiple management fees, and with a single pot it can be easier to manage your savings and simpler to choose your options at retirement.  However, you should check whether there are any termination penalties on the account, whether you will you miss out on loyalty bonuses or guaranteed annuity rates, or whether the transfer will result in any other adverse consequences. 

Find out how much retirement income you might receive from your private pension pots and how to boost it by using our Pension Calculator.

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

Assuming you are over 55, and your frozen pension is defined contribution, you can cash in the pension pot in exactly the same way as any other pension. This may involve drawing out the whole sum as cash, if the pension is very small. Otherwise, you should seek advice on the best way to do this. Remember that drawing a pension counts as income, so if you cash in a large sum at once, you may lose a large amount to income tax. Retiring at 55 is a big decision to make, so be sure to consult our article on can I retire at 55 with £300k.

If your pension is defined benefit, you will not be able to access it until your 'normal retirement age' as defined by that particular scheme. However, you may be able to transfer it into a pension pot before that date (i.e. before you start to draw the benefits). Talk to a financial adviser about this.

What about ‘pension liberation’ or ‘pension unlocking’?

Avoid, avoid, avoid! This usually involves an offer to access a pension pot before you reach the age of 55. Given that this is illegal (other than in exceptional circumstances, such as early retirement due to ill health) you can instantly discount such offers as scams. You could end up losing most or even all of your pension pot.