• Pension Transfers

Changes to the Dormant Assets Scheme could affect your pension

Posted on: 14-04-2021

 

The UK government recently announced changes to the Dormant Assets Scheme, and it could affect you. By expanding the scheme, the government could generate around £800m using pensions and investments that people may not even realise they have.  This article looks at the Dormant Asset Scheme and what recent changes to the scheme could mean for your pension.

The Dormant Assets Scheme explained

Firms can sign up voluntarily to the Dorman Asset Scheme which is an initiative by the UK government. These firms can donate funds from people’s dormant assets to various charity and social causes. Previously, the scheme covered dormant banks and building society accounts. However, the changes will see pension and insurance products added to that list. The products included from the insurance and pension sector are:

• Savings endowments
• Term insurance
• Annuities with a guaranteed payment period
• Whole-of-life assurance
• Investment bonds
• Income drawdowns
• Deferred annuities

In a statement, the government suggests that an estimated £880 million will be available for good causes by expanding the scheme.  The long-term recovery from Covid-19 will no doubt be at the top of that list. In May, the scheme released £150 million to support charities through the pandemic. It’s important to note that the proposed changes require legislation to be passed. Due to this, it is unclear when the changes will come into effect. However, when passed, pensions left untouched for years will be handed over to causes that the Dormant Assets Scheme supports.

What this means for you

It’s not uncommon for people to have multiple pension pots with different employers using different providers. Throughout our careers, it can be easy to forget about a pension you paid into years prior. This is especially true for those who have worked in the UK as expats and built up a pension. Those returning to the US often become disconnected from their UK assets such as pensions. You could simply forget about a pension that you are entitled to due to a lack of correspondence over time. The UK government has stated that it will reconsider whether or not to include contract-based defined contribution (DC) pensions in the future. If contract-based DC pensions are included, this could affect those with self-invested personal pensions (SIPP) other personal pensions. According to the Association of British Insurers (ABI), DC pensions will only be included if they:

• Have a contractual end date
• Have assets held in cash
• The beneficiary cannot be traced

You should note that the Dormant Assets Scheme always allows you to claim your money back. One of the main focuses of the scheme is to reunite people with lost money.

Seeking advice

If you have a UK pension, we strongly recommend that you take the time to review it with a US regulated investment advisor. Legislation surrounding pension is constantly changing. Not only that, personal circumstances change over the years. That’s why it is important to take qualified advice and ensure your pension is being correctly managed and in the best place. If you would like to find out to make the most of your retirement savings, contact us using the form below. One of our experienced investment advisor representatives will be in touch to help you.