What is an unclaimed pension plan?
An unclaimed pension plan is a term that refers to the pension benefits or entitlements of an individual who has made contributions into a pension scheme throughout their working life but who, since retiring (or having passed away), has not received an income from it; the plan will therefore be unclaimed by the rightful owner (or their living heirs).
Note that individuals can and often do have more than one pension plan they have made contributions to in their working lives, and it is often this fact above all that leads to some pensions going unclaimed. Note also that both defined-benefit and money-purchase pension plans can become unclaimed.
In July 2012 the DWP estimated that by 2050 over 49.6 million workplace DC pensions will be dormant, with the value of this pot estimated at £757bn.
When is a pension policy considered unclaimed?
The pension scheme provider or administrator will know the age of their scheme members and so can work out who are at, near or past their (default) retirement age. Note that recent changes in the law on retirement, including the phasing out of the default retirement age altogether, are set to make it more difficult than before to ascertain when a scheme member is not aware of an entitlement, or simply deferring their retirement income (or has passed away before retiring).
The rules on annuatisation at age 75 are also being reviewed and almost certainly set to change. This will mean that the pension provider will eventually not even be able to definitively classify a pension plan as unclaimed when a scheme member has reached this age and has not made contact with the provider. Presently, if contact is lost with the scheme member and they have reached the age of 75, their plan will automatically be treated as unclaimed or dormant, and the member as ‘dissenting’.
Types of unclaimed pension plans
Unclaimed pension entitlements can be associated with either an occupational (i.e. employer) or personal pension scheme, but occupational schemes are the most common type that go unclaimed. Of these, there are the two types: ‘defined-benefit’ and ‘money purchase’. Either may become unclaimed but it will often be the case that the value of a ‘defined-benefit’ scheme pension may be diminished (sometime severely) in the event of the scheme member passing away, depending on that particular scheme’s rules. The value of a ‘money-purchase’ scheme pension plan will usually remain unaffected.
It is worth noting that ‘trivial’ pensions, i.e. small or very small entitlements held within occupational schemes on behalf of existing or past members (the term trivial defined by HMRC) are very likely to be forgotten about by the scheme member, often because contributions are made many years or decades before retirement.
Why do unclaimed pension plans exist?
Fundamentally this is due to funds being held in a UK pension plan that are protected by law (not necessarily for defined-benefit). So therefore, the actual funds in a pension scheme will not be lost or diminished when, for example, the sponsoring employer goes into administration (unlike perhaps a shareholding in that same company), or forfeited if the plan is unclaimed for a number of years (unlike unpaid dividends on the same shareholding). Normally, the entitlements of the scheme member or their living heirs are preserved until a valid claim is made and accepted (and the funds paid out).
Examples that may lead to unclaimed pension plans include:
What happens to the funds in unclaimed pension plans?
The funds in the pension plan remain the beneficial property of the scheme member, or someone who has a legal claim on their pension entitlement in the event of their death. Funds are always held in separate legally-protected nominee or trust accounts until the rightful owner(s) or their living heirs or beneficiaries come forward or are found.
Why have I not been notified of an unclaimed pension plan?
In many cases the pension provider will have made considerable efforts to contact the scheme member without success. Correspondence will usually have been re-sent to the last known address, but often the scheme member will have moved away a long time beforehand (possibly causing the breakdown in communication in the first place), and so will not have replied. Some pension providers will then take further steps to trace their members or their beneficiaries by using our services.
Why are SAYE savings plans in the same category as pension plans?
Save-As-You-Earn (SAYE) savings schemes are employment-related and can be unclaimed due to losing contact with the member (change of job circumstances). The reasons why they are unclaimed are therefore similar to those for employee pension plans, and, like most unclaimed pensions plans, we must work closely with the (former) employer to trace the members they have lost contact with, or have died, but who have an outstanding entitlement.
How do I claim the funds from an unclaimed pension or SAYE savings plan?
The Pensions Service provides a tracing service that can help individuals find an up-to-date contact address for a scheme they believe they are a member of. If you believe you have an unclaimed pension plan, and know some details already, then this service may help. If however you are not aware of an unclaimed pension, either in your own name or in the name of someone who has passed away (whom you are one of the beneficiaries of), the easiest way to receive the benefit from your entitlement will be through using services such as ourselves.
There is no easy way to independently find out whether you have an entitlement to an unclaimed SAYE scheme but we have a wealth of knowledge and skills to help you.
It should be noted firstly that not all the people we contact are owners or beneficiaries (i.e. you may be contacted in the process of tracing the individuals that are entitled).
If you are (one of) the individual(s) we believe is entitled to an unclaimed pension or SAYE savings plan however, we will help you to take the steps necessary to reunite you with your unclaimed entitlement(s) relatively quickly and easily, as we will be working closely with the pension provider or former employer in question.