Bereaved father Ian Isam appealed to This is Money columnist Steve Webb for help after his late daughter’s former employer told him her pension was ‘lost’.
We cover the full case here, including a response from DHL which has now made a voluntary payment to Mr Isam’s daughter Lisa’s estate.
My daughter died recently and whilst going through her paper work I found evidence of a DHL pension.
I have a letter welcoming her to the pension scheme dated 1 October 2013. The name of the scheme is DHL Group Retirement plan – auto enrolment defined contribution section.
Her contribution was 1 per cent and the company’s was 2 per cent. I do have payslips that show contributions were made.
Late daughter’s pension: Steve Webb explains the old and current rules for people who save into schemes for only short periods
I think that she was in the scheme for less than two years as I have found a payslip from her next employer dated 30 September 2015.
I have contacted DHL by email, as the phone is never answered, and a lady rang me back and told me that because my daughter had not transferred her pension to a new fund, that the money was lost.
She may have had her contributions refunded, I have no way of checking this. But if the money was refunded why would they say that it was lost?
I do realise that we are only talking about a small amount here, but my daughter was a single parent and had to make every penny count.
SCROLL DOWN TO FIND OUT HOW TO ASK YOUR PENSION QUESTION
Steve Webb replies: Please accept my condolences on your recent loss. This is Money and I have been doing our best to help, and I am pleased to hear that you have received a payment to your late daughter’s estate.
We thought however it would be worth explaining the rules around small pension pots for the benefit of other readers.
Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below
What you can do with a small pension pot, or one built up during a short period of employment, depends on the type of pension you have and how it was created.
The simplest situation is if you are ‘automatically enrolled’ into a pension and immediately opt out. As long as you do this within a month of being enrolled then you will get your contributions back (and the employer is refunded as well).
In this specific case, it is as if you had never been part of the pension scheme. A similar ‘first month’ rule applies to those who are placed into a workplace pension as part of their contract of employment when they join a new firm.
Once you have been in a ‘pot of money’ pension for more than a month, you are no longer able to get the money out until you reach age 55, other than in cases of serious ill health.
It used to be the case that if your ‘pot of money’ pension was an occupational pension – that is, it had trustees looking after it rather than it being contracted out to an insurance company – you could apply for something called a ‘short service refund’ during the first two years of your employment.
You could have a refund or transfer your entire pot, including employer and personal contributions, to another scheme.
However, you had to do this within a certain deadline, typically three months, otherwise you would lose the employer contributions and only get your own back.
But the ability to take a ‘short service refund’ from this sort of pension was abolished from October 2015, when the system I described above took effect for occupational schemes too.
At the time the rule was abolished, around 20,000 people a year were taking refunds of this sort.
The process of automatic enrolment is likely to generate large numbers of small pension pots as people move from job to job.
In most cases there will be nothing to stop you combining all of these pensions in a single larger pot if you wish, but you will still be subject to the age 55 rule if you actually want to take money out of your pension.
Some people will have pension rights arising from short-term membership of a salary-related pension scheme.
These days it is mostly people who work in the public sector who build up salary-related pensions, but many people may still have such a pension from a previous job.
In this case, provided that the scheme rules allow it, you may be able to apply for a refund of your contributions if you were a member of the scheme for more than three months but less than two years.
However, it is worth bearing in mind that if you do apply for a refund you are likely to be throwing away the money that your employer contributed into the scheme, and this will have an impact on your standard of living in retirement.
ASK STEVE WEBB A PENSION QUESTION
Former Pensions Minister Steve Webb is This Is Money’s Agony Uncle.
He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement.
Since leaving the Department of Work and Pensions after the May 2015 election, Steve has joined pension firm Royal London as director of policy.
If you would like to ask Steve a question about pensions, please email him at [email protected].
Steve will do his best to reply to your message in a forthcoming column, but he won’t be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
Please include a daytime contact number with your message – this will be kept confidential and not used for marketing purposes.
If Steve is unable to answer your question, you can also contact The Pensions Advisory Service, a Government-backed organisation which gives free help to the public. TPAS can be found here and its number is 0800 011 3797.
Steve receives many questions about state pension forecasts and COPE – the Contracted Out Pension Equivalent. If you are writing to Steve on this topic, he responds to a typical reader question here. It includes links to Steve’s several earlier columns about state pension forecasts and contracting out, which might be helpful.
If you have a question about state pension top-ups, Steve has written a guide which you can find here.
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