What to do if your workplace pension scheme is closed or wound up :Cross Stitch – Pensions and retirement planning
Your workplace pension scheme may be closed to new members, frozen (closed to all members) or wound up (fully closed down). Find out why this can happen and how this might affect you. If you need further advice, there are various organisations you can speak to.
Your workplace pension scheme may be closed or frozen in the future because it doesn’t have enough money to pay pensions when they’re due. For example, if the total value of your workplace pension scheme’s investments is less than either:
- the amount it has to pay out now
- the amount it is due to pay out in the future (which includes all the members’ contributions so far)
Whoever looks after your workplace pension scheme is responsible for making sure it does not run out of money.
However, if your workplace pension scheme does run out of money then whoever runs your scheme can either:
- ‘close’ the workplace pension to new members – existing members can continue to contribute and receive a pension
- ‘freeze’ the workplace pension – it will be closed to everyone and existing members’ benefits will be affected (depending on the pension plan rules)
If you are already a member of your workplace pension scheme but it has been closed to new members then you should not be affected. The scheme will continue to run normally.
If you’re a new worker ask your employer if they offer access to any other type of pension scheme.
In defined contribution pension schemes, money is paid into a pension pot which belongs to you. The amount you get is based on the contributions paid in and how well the investments have done. You can use this money to buy a retirement income when you retire. See the link ‘Types of workplace pension schemes’ to learn more about ‘defined contribution pension schemes’.
Occasionally, an employer may tell you that they want to close its pension scheme. If this happens, your employer may want to transfer your pension to another pension provider or arrange for you to become a member of another type of workplace pension. For example, a group personal pension or a stakeholder pension scheme. This is sometimes known as a ‘buy out’.
Where a workplace pension scheme is frozen, no further contributions are collected from current members and no new members are able to join.
If you’re a member of the workplace pension scheme, whoever runs your pension scheme will tell you the value of your pension at the time it was frozen.
Winding up is a process that ends a workplace pension scheme. This may happen for a number of reasons depending on the workplace pension scheme’s rules. These include:
- the employer has gone out of business
- the employer has merged with, or been taken over by, another business
- the employer has permanently stopped contributing to the workplace pension
- The Pensions Regulator has directed a workplace pension scheme to wind up
If the workplace pension scheme is being wound up, whoever runs it must fully explain why. They must also keep members up to date on a regular basis. What happens to your workplace pension scheme will depend on why it has been wound up.
Your workplace pension scheme trustees can give you advice about your pension.
Pension scheme administrator
Your pension scheme administrator can answer specific questions about your pension.
The Pensions Regulator
The Pensions Regulator has powers to regulate the way that workplace pension schemes are run. It can also investigate pension fraud and badly run workplace pensions.