Preserved Member Explained - What Category Of Scheme Member Are You?

Preserved Member explained

In its most simple terms a preserved member (often called a deferred member or deferred pensioner) of an employment based pension scheme will be someone:

who has pension benefits within the pension scheme, and

who has ceased to accumulate (further) pension benefit in that particular pension scheme (for future service), and

who is not already in receipt of the pension benefit from that scheme or who has not transferred those benefits to another pension arrangement.

Someone who is a preserved member is said to have a preserved benefit - sometimes called a deferred benefit or 'frozen pension' (but a truly 'frozen pension' is less common that most people think).

Having been a member of an occupational pension scheme, you could become a preserved member if:

you have more than two years pensionable service in the scheme (or less than 2 years pensionable service if the scheme rules permit). Typically used by defined benefit schemes.

and/or

you match one or more of the following:
you have left your employer (e.g. you may have moved jobs or been made redundant)
you have remained with your employer but have elected to ‘opt-out’ of your employer’s pension scheme for future benefits
you have remained with your employer who has ‘closed the pension scheme for further accrual’
your pension scheme is being wound-up and your benefit options have yet to be defined.

Example 1 – Preserved Member

Leaving the employer

Peter Wilson worked for ABC Ltd but left a couple of years ago to take up a new job elsewhere.

Whilst he was employed by ABC he had joined the ABC Ltd Pension Scheme as soon as he was permitted. He continued to build up pensionable service until the date he left.

Having worked at ABC for over 10 years he had built up 9 years of pension benefit within the scheme. Whilst he was building up pension service he was an active member.

Upon leaving ABC’s employment he:

has ceased to build up future pensionable service within the pension scheme
has pension benefit which remains in the ABC Ltd Pension Scheme.

Since he left, he is said to be a preserved member of the ABC Ltd Pension Scheme.

Example 2 – Preserved Member

Scheme closed for future accrual

Claire Stewart works for PQR Ltd and she joined the PQR Staff Pension Scheme at the earliest opportunity.

Having built up over 15 years of pension benefit within the scheme, she received formal notice a couple of years ago that the pension scheme would be closed for future accrual and that her benefits would then be based upon salary at that time.

This meant that even though she remained as an employee of PQR Ltd she:

has ceased to build up future pensionable service within the PQR Staff Pension Scheme
has pension benefit which remains in the PQR Staff Pension Scheme.

So, she is said to be a preserved member of the PQR Staff Pension Scheme.

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