Frozen Defined Benefit Pension Plan | UK Pension Abroad
LEARNING OBJECTIVES
We’re passionate about providing high quality, relevant and up-to-date financial information to Expats around the world.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
What a frozen pension plan is and how it works abroad
How to take your defined benefit pension outside the UK
How final salary pension valuations are calculated
The importance of regulated advice
This article is intended for British Expats with defined benefit pension plans.
Upon leaving the UK many expats hold several UK pensions with different providers. These have been built up with each company they worked for. Whilst the terminology varies, they can be referred to as frozen which is always somewhat confusing.
We take a closer look at what a frozen defined benefit pension plan is, what your options are and where you can find help.
What is a Defined Benefit Pension?
A defined benefit pension, also known as a final salary pension scheme, is a retirement plan in which an employer commits to paying a predetermined, regular benefit to employees upon their retirement.
The benefit is based on factors such as the employee's salary history, length of service, and a specific formula provided by the plan.
What Is a Frozen Pension Plan?
A frozen pension is a pension held with your previous employer that you are no longer contributing to.
While the pension fund remains in place, it ceases to receive additional contributions from you or your former employer. Instead, the funds already accumulated in the pension scheme continue to be invested until you reach the retirement age specified by the plan.
What Happens With Frozen Defined Benefit Plans?
For a defined benefit plan, the terminology remains the same in that it may be referred to as frozen once you have left the scheme. However, your pension benefits will continue to accrue until your stated date of retirement.
A DB scheme differs from a defined contribution pension by the way your benefits are calculated. More information on how to calculate defined benefit pension value can be found on here.
Importantly, your pension has not been frozen per se and the overall benefits of your retirement savings will continue to grow.
Frozen Pension Options
Once you have the required information on your frozen pension, there are various options available:
Transfer Your Pension
If you hold more than one pension, you can consolidate them all into one pot. Note any DB scheme valued over £30,000 will require advice from an FCA authorised Pension Transfer Specialist on each scheme held.
Take Benefits
If you are age 55 or older, you can access your pension. Note that most defined benefit pension schemes have a Normal Retirement Age (NRA) of 60 - 65. This means if you want to access your pension pot before this, the annuity being offered will be reduced.
Do Nothing
There is no obligation to transfer your final salary scheme. For most members, the guaranteed income will play an integral role in their retirement provisions, and it's best to leave as it is.
Valuation of Frozen Defined Benefit Pension
If you do not have a current valuation of your frozen defined benefit pension plan this is the best place to start.
Your pension plan is managed by a group of trustees who are responsible for ensuring the scheme is run properly and your benefits as a member, are secure.
You should be provided with an annual CETV Cash Equivalent Transfer Value along with the pension benefits payable at the stated date of retirement.
If your address is not up to date this won't be the case. Often old frozen pensions have been forgotten and require a tracing. This can be done via a Letter of Authority.
Taking Expat Financial Advice
The Wealth Genesis specialises in helping expats throughout Europe, the US, and the rest of the world with their financial planning needs. We hold the required licenses and expert knowledge for cross border wealth management. We assist British expats with UK Pension transfer and management, US retirement accounts, and locally compliant investment plans.
Throughout our advice process, we put you and your family at the centre, understanding what drives you and your key objectives before recommending an investment strategy to meet those goals. This can be isolation for a single pension policy or your overall financial plan.
We've helped expats all over the world gain control and access to their UK pension schemes to enable greater freedom and peace of mind in later life.
To understand how we can help you, get started using the button below.
FAQs
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As long as you are of retirement age, you can still access your pension funds.
However, how you can access it will depend on your provider. Most will no longer allow you to take money on a regular basis as a non-UK resident. -
Yes, they will remain invested and should continue to increase in value over the long term, subject to market conditions.
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In short, no.
UK pensions and US retirement accounts operate under different rules and legislation. As such, they cannot be transferred like for like. -
We charge a flat-fee of £3,000 to all our clients, regardless of the value of their pension.
There are also external FCA report writing costs to consider, which typically cost between £2,000 and £3,000.
