You’d think that once you’ve done all the hard work of saving into a pension plan, often over many years, you wouldn’t forget all about it when you change jobs or come to retire, and lose out on the money you’ve put aside …
But, unfortunately, it’s easier to do than you think and happens a lot.
The Association of British Insurers (ABI) estimates that more than 1.6 million pension plans, worth £19.4 billion are currently lost or unclaimed. That amounts to an average of £13,000 per plan.
And what’s worse, there are concerns that the number of lost pension plans is only going to rise with the job changing and job losses brought about by the coronavirus crisis. In fact, one study reported in FT Adviser in June predicted a 32% increase in the number of dormant pension plans by the end of 2020. The government has predicted that by 2050 there could be as many as 50 million dormant and lost pensions.
How does this happen?
So, what’s the cause of all these forgotten and even lost pension plans? Well, the good news is that every employer now has to provide most of their workers with a pension plan that both they and their employees pay into. The bad news is that many employees don’t pay much attention to their workplace pension plan, or what it’s worth. And then, when they leave or change jobs, they often forget all about it.
It’s estimated that the average UK employee changes job every five years, and for some it could be more often. So that could mean a lot of pension plans to keep track of.
The millennial generation are likely to move jobs even more often with research reported by Talint International estimating they’ll have around 12 jobs over a working lifetime. Even more pension plans to keep an eye on!
ABI research also found that only one in 25 people would instinctively think to tell their pension provider when they move home.
How to find old pension plans
If you think one or possibly more of these lost or dormant pension plans could be yours, it’s quite straightforward to track them down. It just involves a little bit of detective and paperwork.
With your national insurance number, the names and addresses of your previous employers, and some help from the government’s Pension Tracing Service, you should be able to find out everything you need to know.
If it’s been some time since you took out the pension plan, you could be in for a nice surprise as it’s had the potential to grow in value over the years.
Tom, a client director, says: “I’d been meaning to track down a pension I paid into for two years with my first job about 25 years ago now. When I finally did the paperwork, I was really surprised to get a valuation of £13,000. That’s about five times more than I’d expected.”
Keeping track of your pension plans
More than half of workers don’t know how much money they have in their pension plans and our own research shows 51% don’t know which company provides their workplace plan.
It’s usually very easy to get hold of your pension details from your current employer and generally you can keep track of your pension account online. That way you can keep tabs on how much you’ve saved so far and begin to think about how much you might need to save for the future.
Consider bringing all your pensions together
When you’re on top of what you’ve got, you might also want to consider moving older pension plans into your current plan to make things easier to manage.
While it won’t be the right move for everyone, it can cut down on admin time, as well as potentially reducing the charges you pay.
However, it’s important to note that some older workplace pensions might have valuable benefits, so you may have to take or would benefit from financial advice about your own circumstances before making any decisions. This particularly applies if you’re thinking about moving money out of a final salary (also known as a defined benefit) pension.
Remember, a pension is an investment, so its value can go down as well as up and it could be worth less than was paid in.
Getting everything into shape
Tracking down any old pensions, consolidating them into one plan if that benefits you, and keeping a regular eye on where you are with your retirement savings could help give you peace of mind about your financial future.
There are also really useful tools available, like our pension calculator, that make it easy for you to work out what you should be saving today to make sure that your future tomorrows are just as you want them to be.
And the next time you move jobs or change address, take the time to do the little bit of paperwork that will help you keep track of your old pension plan.
The information here is based on our understanding in August 2020 and shouldn’t be taken as financial advice.
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