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Pensions and retirement planning
What to do if your company pension scheme is closed, frozen or wound up
Your company pension 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.
Why company pensions are closed or frozen
Company pensions are usually based on your final salary and the number of years you have been in the company pension scheme.
Your company pension may be closed or frozen if it runs out of money. For instance, if the total value of your company 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 member’s contributions so far)
The trustees who look after your company pension scheme are responsible for making sure it does not run out of money. But if your company pension scheme does run out of money then the employer or the trustees can either:
- 'close' the company pension scheme to new members – existing members can continue to contribute and receive a pension
- 'freeze' the company pension scheme – closed to everyone and existing members' benefits will be affected (depending on the pension plan rules)
Your company pension is closed to new members
If you are already a member of your company’s 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 are a new employee you can ask your employer if they offer access to any other type of pension scheme, for example:
- a company pension scheme that is based on your salary
- a group personal pension plan (GPPP)
- a stakeholder pension
But your employer does not have to contribute if you join either:
- a group personal pension plan (GPPP)
- a stakeholder pension
If you do join one of these pension schemes then you are likely to receive fewer benefits than employees who are members of your company's final salary scheme. Most GPPPs have an employer contribution, although this is not compulsory.
Your company pension is frozen
Where a company pension scheme is frozen, no further contributions are collected from current members and no new members are able to join.
If you are a member of the pension scheme, your pension scheme administrator will tell you what benefits you have earned.
Your employer must then provide access to a new company pension scheme as they would for new employees.
Why company pensions are wound up
Winding up is a process that ends a company pension scheme. This may happen for a number of reasons depending on the company pension scheme's rules. These include:
- the company has gone out of business
- the company has merged with, or been taken over by, another business
- the employer has permanently stopped contributing to the company pension scheme
- The Pensions Regulator has directed a company pension scheme to wind up
If your company pension is wound up
If the company pension scheme is being wound up, the scheme’s trustees must fully explain why and keep members up to date on a regular basis. Find out what happens to your company pension scheme – this will depend on why it has been wound up.
Where to get advice
Company pension scheme trustees
Your company 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 company pension schemes are run. It can also investigate pension fraud and badly run company pensions.
Independent Financial Advisors
It is important to get advice from an independent financial adviser (IFA) or The Pensions Advisory Service before making any decisions about buying annuities or transferring your pension.
The Pensions Advisory Service
The Pensions Advisory Service gives independent advice on general pension rules and regulations.
Financial Services Authority (FSA)
The FSA regulates the sale of pension products. You can find information about pensions on its website.
