The 'hidden' pension billions.
According to This is Money (June 5th, 2012)
there is in
excess of £1.4billion retained in 'lost' or forgotten pension
pots in the UK. These 'stranded' pots are often relatively small
(less than £5,000) and are typically left behind as a result of
job changes or career breaks, often early in peoples' careers.
Although these 'forgotten' pots may not be life-changing, they
can, in many cases, provide a most welcome addition/supplement
to current pension provisions.
The only problem is that they are not always easy to track down,
and even when that is successful, there is the issue of actually
getting access to the funds.
An important issue is the multitude of changes in pension
legislation in the UK over the past decades,
Although each pension scheme has its own rules and regulations
and often specific conditions attached they are all, generally
speaking, governed by the prevailing legislation at the time
when contributions were made.
Some of the major regulatory pension changes made over the past
35-40 years are outlined in the right side panel on this page.
Although it is inappropriate to generalise too much, it is fair
to say that over the years the protection of the individuals'
pension entitlements have vastly improved.
The situation after 1975
The introduction of
the Social Security Act 1973 (SSA 73) saw a significant
improvement in the members retirement benefits within an
employers pension scheme by allowing the member a deferred
pension on leaving service. These rules were generally adopted
by pension schemes from their formal introduction on April 6th
Many further amendments have been made since - and the general
situation today is that in most cases where an employee leaves
employment (after having joined the employers pension scheme)
the employee will either be entitled to a refund of
contributions or a deferred pension payable upon reaching normal
The exact rules for taking your deferred pension can be quite
complex and may be determined by the statutes governing your
specific pension arrangement.
Reading the small print can be very important!
It was mentioned earlier that many of the 'lost' or 'forgotten' pension pots generally are
relatively modest (although one NFA client recently found a pot worth well
The simplest reason for this is probably that if you had
contributed significant amounts of money for a significant
length of time chances are that you would have remembered
earlier - or at least have checked!
However, often the pleasant surprise may lie not so much in the
size of the sum but in the guarantees attached. Thus, it is not
uncommon to find e.g. guaranteed levels of annuities, or other
generous benefits, which far surpass what is currently expected
It can therefore be of vital importance that you have a
professional advisor to look over that papers for you, so you
don't miss out on such 'cherries'.
What to do with the funds if a hidden pension pot is unearthed?
The easy answer to this question is of course that:
entirely up to you as it is your money!
You should however be aware of the fact that it is not always
possible simply to 'cash in' the pension and spend the money.
The most likely scenario is that a proportion of the fund
(normally 25%) can be taken as a tax-free lump-sum and the rest
used for provision of a life-time pension (annuity).
However, there are specific rules relating to taking small
pension sums (trivial commutation) which may (or may not) apply
to your potential pension pot.