Few Frozen pension related Myths

Only in UK, there are around 5 million people who have a frozen pension problem and the reason being

the ignorance of the adult professional towards their pension plans which raises issues during their

retirement. A pension is said to be locked if there is no more contribution towards it from anyone.

Frequent job change is one of the most common reasons for frozen pension.

Myth #1: Whenever you leave a job, the pension plan attached to it is lost as there is no more

contribution towards it. There is a common myth that the pension plan that is frozen cannot be claimed

back once you change your job. There are certain agencies that can help you to get back your lost

pensions in a legal way.

Myth #2: There are people who think that a frozen pension refers to a terminated one while this is not

the case. When a pension plan is frozen by a company then the participant will no longer be entitled to

its benefits but the plan is still operational and is insured under Federal Pension Insurance Corporation

and there are also chances the plan being unfrozen anytime in future. On the contrary, if a pension

scheme is terminated then all its operations are stopped. If the plan is underfunded then the benefits

will be paid by the Federal Pension Insurance Corporation and if it is overfunded then the insurance

company will get the benefits of over payments.

There are various reasons offered by companies for freezing a pension plan. Those companies which are

financially strong states that the freezing is required to match with the companies which provide no

such pension plans at all. There are also companies which claim that they are bound to freeze pension

plans in order to meet the high charges of health insurances. You will also hear companies saying that

the employer has no value for the pension plan and rather prefer savings plans over it.

Whatever might be the reason given by the company but in true form the frozen pensions allows them

to save money. Less financially stable companies also try to reduce their expenses by freezing the

pension plans. This is a very simple way to pay off the creditors and prevent bankruptcy. If an employer

acquires a new plan then also he can freeze the existing one in order to avoid the hard work involved in

merging both the plans.