Do you have a pension pot somewhere that you’re unaware of or that you’ve simply forgotten about? As more of us move jobs more frequently the chances are that increasingly the answer is yes. Moving house can add to the risk of pensions going unclaimed as people forget to inform their pension provider of their new address.
According to a recent survey nearly two thirds of the UK population (64%) now have multiple pensions and just over a fifth of us (22%) have lost track of one or more of our various retirement savings pots and this figure has increased slightly.
The survey, published in May by international life insurance, pensions and asset management company Aegon suggests that around 7million people have misplaced some of the savings they’ve been building up for their retirement. Alongside this, according to Government figures, unclaimed pension savings are worth an estimated £400million. Could some of this be yours?
The problem has increased over recent years, according to the findings. Government research reveals that these days people will, on average, have 11 employers during their working life. The problem is likely to continue to get worse with the introduction of auto-enrolment as more and more of us take out pensions with those employers.
According to a government paper called Meeting future workplace pension challenges: improving transfers and dealing with small pension pots, “This combination of job churn and five to eight million new pension savers could lead to up to 4.7 million small pension pots added to the system by 2050.”
The government has been considering the introduction of a system known as “pot follows member” in which pensions that are worth less than £10,000 automatically follow an employee into a new job. However, the pensions minister has indicated that he’s not ready to do this yet.
The good news is that checking to see if you’ve got pension pots that you didn’t know about or that you’ve forgotten you started is quick, easy and usually free. Obviously, you can contact your former employers and speak to their pensions departments. Another option is the government’s Pension Tracing Service (0345 600 2537). With its details of large numbers of pension schemes, it can help you to locate any pots that you might have lost track of. It can sometimes locate a pension even if you’ve lost the contact details yourself. The Money Advice Service also has advice on tracing lost pensions.
So, what should you do if you find that you’ve amassed a number of small pensions from the various organisations that you’ve worked at as well as any other retirement savings? The immediate answer is, of course, to take financial advice. You might want to consider bringing them into one single pensions pot since even if they’re united with their owners, having lots of these little pensions presents problems for savers.
As Meeting future workplace pension challenges notes: “Some [people] may pay higher annual management charges for any deferred pension pot they are no longer saving into. And pension schemes may pass on the cost of managing more small pots to members.”
The Aegon research also reveals that not only do nearly a third of people asked (30%) not know the value of their retirement savings but over a quarter (27%) would be interested in moving all their pensions to one provider if there were financial benefits. In most cases this will reduce costs and make managing contributions and fees easier.
However, some savers might feel that consolidating their pensions feels as if they’re putting all their eggs in one basket. There are also longer established pensions that currently enjoy benefits that might disappear when those pensions are transferred.
Even though people are increasingly likely to have a larger number of employers over their working lives, it should become easier to keep track of pension savings from next year when the government is due to bring in pensions dashboards. The aim here is to enable you to see all your various pensions and retirement investments, including your state pension, on one screen.
It’s expected that you’ll be able to tell at a glance how much you’ve got in each pension pot, be it work, private and state, and you should be able to see your income when you retire.
They’re being designed and developed by the government with help from the Association of British Insurers and there’s currently some debate about whether financial advisors should have access to the dashboards as well as savers.
In the meanwhile, it’s certainly worth checking to find out whether you have pensions that you’ve lost track of. Then, if you are lucky enough to find some, get advice on what to do with them. They might be small but it’s certainly worth having them and making the most of them.