(updated 26 February 2007)
WELCOME!
Introduction
This is a simple private compiled guide to claiming UK pensions. The author has over 26 years experience in the UK pensions industry and hopes readers will find the following useful. In writing this, consideration has been given to both UK residents and ex-patriots now resident overseas.
If you think you are entitled to a pension from employment or state pension benefits from the UK, the following guide might help you track them down and explain some of the key considerations when claiming them.
Unclaimed pension benefits may exist if you have paid UK tax and national insurance contributions. You may be entitled to a pension from the UK state pension schemes or from your previous employer. If you were self employed you may have an old pension with an insurance company.
For overseas residents there are special considerations for taxation and currency exchange.
Should you be successful in tracing a pension, and you are considering claiming benefits early, be careful to check any penalties for early payment and request a comparative quotation for the payment at the scheduled maturity date. Private pensions can be paid from age 50 at the earliest (but check any early payment penalties). The earliest age is increasing to age 55 from April 2010. There are concessions for physically demanding occupations with short working careers (such as divers and sportsmen).
Most UK pensions allow for part of the benefits to be taken as a lump sum free from tax. This option is only available when benefits commence and not after a pension has already come into payment. Any pension payments will be subject to UK taxation. Note that, as a concession, small pensions of less that £260 p.a. may converted fully to a lump sum under certain circumstances, in which case some of it may be subject to unrecoverable tax.
The UK has double taxation agreements with most major foreign countries. This enables the pensions to be paid from the UK without deduction of UK tax at source and, instead, is taxed in your country of residence. Remember that it is your responsibility to manage your own tax affairs and you must apply personally to HM Revenue & Customs (previously known as the Inland Revenue) to apply for this facility.
It is usual for UK pension providers to deduct any banking costs that they incur when paying benefits outside the UK. It is worth considering payment to a UK bank account if you have one and drawing on the funds at your leisure to reduce the number of banking transactions and related costs. The pension provider may be able to pay pensions at longer intervals, say annually rather than monthly, again to reduce transaction costs.
Tracing your company
or personal pension
Most problems in claiming lost pensions arise from losing touch with the former employer, insurance company or changes in UK government and legislation. Over time, changes in name, address and organisational structure make it difficult recommence contact. In any case, your pension rights should have been protected and you should still be able to find them if you know where to look.
If trying to trace a former employer or insurance company, write to the last known address giving as many detail as possible about yourself and the pension you are trying to trace. Be specific. Give dates when you would last have been in contact, any relevant company names, policy or reference numbers, your full name, previous and current addresses, date of birth and national insurance number. Supply photocopies of any benefit certificates or policy documents. Many claims fail due to providing insufficient information or evidence.
Many claims turn out to be invalid as refunds were taken in the past and the claimant, over time, has forgotten that this happened. Current legislation does not permit refunds from schemes run by employers if membership has been for more than 2 years. This has not always been the case. Prior to 1975 it was possible to take refunds of all benefits before retirement regardless of length of membership. It was still possible to claim these refunds of pre-75 benefits many years later. The first rules for preserving pension benefits were set at 5 years membership. This was later reduced to 2 years.
In recent years, all private pension schemes run by UK employers have been required to register with a central Pensions Registry. From April 2005, this is run by the Pensions Service, part of the Department of Work & Pensions. Contact the Pension Tracing Service to request a search. This service is free to individuals. The Pensions Advisory Service gives useful tips for searching.
If your previous employer no longer exists, it is likely that the pension benefits were transferred to an insurance company. Tracing the employer’s liquidator may help or write to a selection of popular insurance companies with your details and enquire regarding “pension buy-out policies”.
Insurance companies can merge with others and change their names. As a result, old policies may have been taken over by a succession of insurance companies. If trying to contact the last known insurance company fails, try contacting The Association of British Insurers to find the name of the current insurer.
Incisive Media plc, tel +44 (0) 20 7306 7000, publish a yearly Insurance Directory 2005 (ISBN: 0 900414 63 4). This lists current UK insurers and details of old companies which have been merged or been bought by them. Unfortunately, it is only indexed by current name but patient browsing can be rewarding. Be warned, this is a specialist publication and is expensive. Try a specialist library or a friendly contact.
The Unclaimed Assets Register lists many of the major insurance companies as contributors. (search fee payable, but see DIY tips and useful links for free).
State pensions
Individuals often forget that they may be entitled to a pension from the UK state as a result of paying UK national insurance contributions. You can check your entitlement by contacting the Department of Work & Pensions (formerly known as the Department of Social Security) to request a quotation. The UK has operated a two-tier state pension system for many years. This means that workers can build up two distinct parts of pension; a basic pension (commonly known as the ‘old age’ pension and an additional pension based on earnings. You may come across the following terms in relation to the additional pension:-
· State Graduated Pension Scheme - a forerunner of SERPS with very small resulting pensions operated from 1961 to 1975
· SERPS (State Earnings Related Pension Scheme) which was operated from 1978 to 1997
· S2P (State Second Pension) which replaced SERPS and ran form 1997 to the present day
Employees could ‘contract out’ of these upper tiers. That is to say, employees could choose not to have a pension from the government in respect of the additional earnings related pension. Instead, workers could pay reduced National Insurance contributions and provide for alternative pension themselves either via an insurance company or via their employer’s pension scheme. Contracting out may have been compulsory where the employer decided this for all employees in their pension scheme, especially where trade unions where consulted. The exact process is very complex but it always worth remembering to ask employers and insurance companies if you were ‘contracted out’ and whether any national insurance rebates would have been invested in your pension. The Department of Work & Pensions will have a record of any periods of contracted out employment during your working lifetime. Whilst on the subject of state pensions it is worth knowing that currently your basic and additional pensions are calculated on your personal national insurance contribution history. If you had periods when you weren’t employed, you may not qualify for the full benefits. Some periods of unemployment qualify for credits so your pension is not affected. It is possible to make up missed contributions to fill the gap in your national insurance history and make up for lost pension. This is worth investigating as the pay back can be very beneficial. See Directgov for details of qualifying for the State pension and how to make up for gaps in your National Insurance contribution history. Note that some political views favour residency tests in future rather than National Insurance records but nothing has been decided yet. You can apply for a pension forecast from The Pension Service.
With regard to pension age, the UK government pay pensions from age 65 for men and 60 for women. They do not pay retirement pensions before these ages. All able-bodied persons are considered available for work up to these ages. A complex benefits system caters for people who cannot work due to illness, disability, caring for others etc. If you choose not to work for lifestyle reasons you are expected to finance this luxury yourself.
The minimum pension age for women is being increased to 65 to equalise with men. If you are a woman and were born from 6 April 1950 to 5 April 1955 then use the State Pension age calculator from The Pension Service. Woman born before this period have state pension age of 60 and born after this period have a state pension age of 65. There is pressure to increase pension ages still further to perhaps age 70 for both sexes although nothing has been decided on this yet.
Generally, UK state pensions are increased in line with price inflation. However, for residents in some (but not all) foreign countries these increases are not paid. This is for historic reasons. If you permanently live abroad, or intend to do so, it is worth checking whether you will qualify for pensions increases. The Carson case recently challenged the government’s position on this. Where you live, inflation may be higher or lower than the UK. If you have chosen to live abroad this is a matter of personal choice. The UK government cannot promise to link pensions to inflation in other countries.
It is possible to defer taking your pension beyond state pension age in return for increased pension and lump sum payment when you do eventually decide to take the income. See State Pension deferral details from The Pension Service.
I’m still stuck, please help find
my pension!
If you get really stuck then you can send me an enquiry. I will try to help on a voluntary basis. I cannot promise to actually find your pension but I may be able to suggest more avenues to explore.
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