A retired individual who paid additional voluntary contributions (AVCs) into their final salary pension scheme between 1987 and 1994 found that the current administrator had no record of these payments. The former employee contacted the pension administrator to verify if their current pension payments included these AVCs, as they had not been mentioned in any correspondence.
The administrator's initial response was that they had no record of the extra contributions and could not offer further assistance. This lack of information was compounded by the fact that the scheme had changed administrators three times since the contributions were made. The retiree no longer possessed payslips from that period and did not recall receiving any statements or confirmations regarding the pension value or the additional contributions.
Steve Webb, a pensions expert and columnist for This Is Money, explained that AVCs can be managed in three ways. Firstly, they can be used to buy extra rights within the existing defined benefit scheme, such as purchasing additional years of service. Secondly, they can be used to build a separate defined contribution pension pot within the same scheme, which would be invested. Thirdly, they could be 'freestanding' AVCs, paid to a completely separate arrangement, although facilitated by the employer.
Initially, the administrator's denial of any record suggested the possibility of freestanding AVCs. However, after further inquiry and online searches for the company's external pension providers at the time, no record was found for the individual. Subsequently, the pension administrator contacted the retiree again, confirming that they did, in fact, have a record of the AVCs. It was determined that these contributions had been used to purchase additional rights within the defined benefit scheme, and the retiree was already receiving an enhanced pension as a result. This explained why no separate paperwork for an additional pension pot had been received.
Webb noted that while the upcoming pensions dashboard is expected to simplify the process of tracking down missing pensions, it would not have assisted in this specific case as the pension was already in payment. However, for those still trying to locate separate pension pots, the dashboard is anticipated to help many individuals reconnect with lost or forgotten funds without requiring a deep understanding of pension technicalities.