You might look on in disbelief at the idea of losing track of your hard-earned cash, and yet an estimated £50 billion is at risk of being misplaced in abandoned pension accounts or scattered across multiple lost pots. This is according to new research conducted by the CEBR on behalf of PensionBee which says at least 4.8 million pots were considered to be ‘lost’ among the UK population in 2023.
It also found almost one in 10 workers believing they have lost a pension worth more than £10,000. That’s a vast sum of money to let slide, so what exactly is going on – and what can you do about it?
Why are people misplacing pensions?
There are a whole host of reasons why savers are losing touch with their pots. For starters, workers are changing jobs a lot more frequently. Matters have been exacerbated by auto-enrolment, which has significantly increased workplace participation since its introduction in 2012. While this is a good thing, for some, it has resulted in a trail of small, forgotten pensions as they move through working life.
In fact, according to the PensionBee findings, today’s youngest workers are forecast to accrue, on average, five pots by the age of 68 – while some could accumulate more than 20 separate pots over a working lifetime. At the same time, with so many different accounts, paperwork and passwords to keep track of these days, some individuals are just not keeping on top of which provider they are with, and where their money is stored. Add in those who fail to inform their provider of their new address when they move house, and you start to understand why so many pensions have been left floundering.
But the implications of this are serious. Becky O’Connor, director of public affairs at PensionBee, said: “For anyone who loses track of pensions, the results can, unfortunately, be a poorer retirement.”
How to track down your hard-earned cash
If you want to set about finding lost and forgotten pots, a good starting point is the government’s Pension Tracing Service. It’s free to use and can help you find both workplace or personal pensions. To use this service, you’ll need the name of the employer or pension provider. Gretel is another tracing service you can try.
How to keep tabs on your pension saving
To reduce the risk of losing any of your savings in the first place, the key is to keep track of old paperwork, employer and pensions provider names, and policy details. Equally, if you are looking for ways to make things easier, you could consider consolidating pensions with one provider. But be aware that this comes with both pros and cons.
On the one hand, this will dramatically reduce the admin and paperwork you have. You could also save yourself a small fortune by combining your pots into a provider with a lower fee. Not only this, you could even find a home for your savings which better suits your retirement plans. Say, for example, you consolidate in a SIPP (self-invested personal pension), this could give you both greater investment choice and cost savings.
On the other, you need to tread carefully, as you could lose out on valuable benefits by consolidating, such as guaranteed annuity rates. It’s also important to check for exit fees or charges for transferring your pots.
Remember that not all pensions can be moved; some public sector pensions, for example, cannot be shifted. To read more about whether or not to consolidate your pensions, head here.
Seek advice
If you’re not sure what to do with your various pension pots, it makes sense to seek guidance. A financial adviser can help assess your circumstances and recommend the right course of action for you.
What about pension dashboards?
Earlier this month, the Department for Work and Pensions gave an update to the timeline for the introduction of pension dashboards. This scheme, which will allow savers to view all their pension information – including their state pension – in one place, has been much delayed.
It was first announced as a policy all the way back in the 2016 Budget. But there are now hopes that things will proceed more quickly, enabling savers to make more informed choices about their pensions.
The expectation is that the biggest schemes – including the largest master trusts and largest FCA-regulated pension providers – will connect to the dashboard ecosystem by the end of April 2025. Remaining schemes will connect in order of size, with the idea that all schemes will have connected by the end of October 2026.
Kate Smith, head of pensions at Aegon, said: “We welcome that the DWP has finally published its dashboard guidance, which includes the new pension scheme’s connection timetable. This confirms that dashboards will become a reality, reconnecting millions of people with their pensions in one place online, helping them to plan for their future selves.”
And what about the ‘pot for life’ plans?
Another government proposal which aims to help address the issue of lost pensions involves having a ‘pot for life’ which each subsequent employer would pay into. This would replace the current system where each new employer means yet another pension. Such an approach, which has already been adopted by countries such as Australia, could help prevent billions of pounds from being needlessly lost.
But while the government recently confirmed it intends to push ahead with these plans, there’s been no mention, as yet, of when the reforms could actually be implemented.
So, for now at least, you need to take matters into your own hands, and take all the steps you can to stay on top of your hard-earned pension savings – to help you enjoy the richest retirement you possibly can.
Photo by Marten Newhall on Unsplash
