If you have worked for more than one employer who offered a workplace pension over your working years, then it’s possible that you have a workplace pension which you no longer contribute to.  We refer to this as a frozen pension.

If you are actively managing and have had any advice relating to this pension in the last year, then it’s likely that everything is fine and you don’t need to think any more about it, but if not, there are a number of points that it would be worth you considering to ensure that this pension is still on track to meet your retirement goals.

  1. Do you know what fees and charges you’re paying? Reviewing a frozen pension might result in being able to reduce costs and even a small reduction in the annual charge could make a big difference at retirement.
  2. Do you know your attitude to risk and do all your pension policies match it? Your policy could be invested in a high-risk fund, which is not ideal if you’re in the last 10 years before retiring.
  3. Do you know if you could benefit from increased flexibility? More modern and flexible legislation started in April 2018, it’s possible you could benefit from this.
  4. Do you have the most up to date tools at your fingertips? Providers continue to update platforms, giving you more access and control, but your policy may not have moved to an updated platform without input from you.

If you have answered no to any of the above questions, it would be worth you speaking to a financial adviser who can help you check the policies and ensure that you are in control of your pension funds.

Lifecycle of the workplace personal pension

  • You are enrolled into the company pension scheme and receive your policy documents.  Your pension is an active policy capable of receiving both employer and employee contributions.
  • If you leave this current employer, your pension would stop receiving employer contributions and become known as a ‘paid up’ pension.  You have the option of leaving it as it is (where it would become what we are referring to as a ‘frozen pension’), or you could continue to manage the pension, and even continue to contribute to if you chose to.
  • Lastly, you will start to take income from your pension.  How this happens depends on the legislation but is often made up of a tax-free-cash lump sum followed by a series of smaller withdrawals.
  • Your pension continues to experience market fluctuations throughout the whole of the policy’s life. Your chosen investments should be monitored according to your attitude to risk.

How much does your pension cost and what are you paying for?
Your typical workplace pension will have an annual charge which is a small percentage (circa 1.00%) of your total pension value.  You may see this written as an AMC, which is an Annual Management Charge, or FBC, which stands for Fund Based Commission.

The annual charges can be split between provider and adviser fees.  Your provider will charge an AMC which covers the cost of “holding” your investments on a platform which gives you access to view your pension value and make any changes to your policy, such as how it’s invested or who the beneficiaries are in the event of your death.  Depending on the policy, your provider may also be actively managing your investments.  The provider will not assess whether the plan is right for you.

Policies set up through MAC Financial may also include the FBC.  Again this is a percentage of your total pension value and means that we are able to provide advice on your policy.  The type of advice you may need is to ensure that the pension meets your retirement goals, is protected and assesses the policy against your affordability and attitude to risk.

To Summarise
If you have a frozen pension, it is important that you review the fees and volatility of your plan to ensure it meets your needs and you’re getting the best value from it.  It is also important that you have the most recent technology at your fingertips to give you ultimate control and access. Financial advice can help you get the most value out of your pension and whether it’s the best platform for you at the time.

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