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Julie Carter

What Exactly is a Frozen Pension?

September 20, 2016

There is so much jargon relating to pensions that the average person can find it difficult to know where they stand with their chosen products. The term ‘frozen pensions’ has been thrown around increasingly in recent months, so our Buxton based frozen pension experts have decided to focus on this subject in the following article allowing you to go into the pension drawdown process with your eyes wide open.

How do frozen pensions differ from deferred funds?

The funds and benefits accumulated from a previous employer are often referred to as frozen pensions but this pension type is in fact very different. A pension fund held by a previous employer is called a deferred or paid up pension, and upon leaving a company many people choose to leave this deferred pension as it is and start a new occupational scheme with their new employer.

These deferred pension schemes are not frozen, and whilst you may not be able to pay into the fund, the contributions invested still grow. You should still receive fund statements and income projections of your deferred pension on an annual basis as a result.

So a frozen pension is a final salary scheme right?

Another common mistake when referring to frozen pensions is that they are final salary schemes but as the benefits amassed increase year on year these cannot be defined as ‘frozen’. Unbelievably, despite the widespread use of the term, there is technically no such thing as a frozen pension, a fact our Buxton financial advisors have to explain regularly, and all pension funds are subject to change.

*This article does not constitute financial advice. Slater financial strongly advises you to seek professional advice before making any financial decisions.*