When we move home, there’s a huge list of tasks to do and providers to contact. So, it’s not surprising that telling pension providers about a new address slips the mind of many, but it means billions of pension savings have been ‘lost’.
A typical pension will move house eight times in their life, making it easy to lose touch with pensions if you forget to notify a provider. Add this to the fact that employees are more likely to swap jobs than they were previously, potentially meaning multiple pensions, and pension savings can quickly become complicated meaning some savings will slip through the cracks.
Research by the Association of British Insurers (ABI) indicates that there are around 1.6 million of pension pots worth £19.4 billion unclaimed. It’s a staggering amount that could have a huge impact on retirement plans. The average ‘lost’ pension is worth nearly £13,000. Whilst this may not be a life-changing sum, it can certainly help you achieve retirement goals and could provide more flexibility.
One of the reasons people are losing touch with pension savings is not telling providers when they move home. During what can be a stressful and busy time, people focus on contacting the provider that they rely on day-to-day. Unsurprisingly, telling their bank or utility providers is high on the priority list of home movers. In contrast, just one in 25 think about telling their pension provider about their new address. Even when prompted, just half of people would move contacting their pension provider to their priority list.
Losing pensions is an issue that’s expected to get worse too. The government previously predicted that by 2050, there could be as many as 50 million lost pensions. This is due to the average number of jobs a person holds rising and auto-enrolment meaning the vast majority of employees will now benefit from a Workplace Pension.
Finding your ‘lost’ pension
If you’ve lost touch with a pension, your first step should be to look through your paperwork. Policy documents and statements will provide contact details, allowing you to update your personal details. If you know who your pension provider is, you can also head to their website or log in to your online account.
If you know you have a pension but aren’t sure of the provider or it’s been acquired by another provider, you can use the government’s Pension Tracing Service here. This won’t confirm if you have a pension or tell you what its value is, but offers contact details for workplace and personal pension schemes, allowing you to get in touch.
What are your options once you’ve contacted a pension provider?
Once you’ve contacted a pension provider, you still need to decide what to do with your savings. You essentially have three options:
Leave the pension savings as they are: You don’t have to decide to do anything with your pension. You can leave your savings as they are, waiting until you need them in retirement. If this is the case, make sure you note down the details of your pension provider, keep track of the value of your pension, and that you notify the provider of any future change of address.
Make additional contributions to the pension: Once you’ve found a ‘lost’ pension, you can add to it, whether through a one-off lump sum or ongoing contributions. It can be an effective way to boost retirement savings and you’ll still benefit from tax relief, assuming you stay within the limits of the Annual and Lifetime Allowance. However, if you have a pension with an existing employer, it’s worth checking if they’d increase their own contributions alongside yours, maximising savings.
Consolidate your pension pots: Consolidating pensions can make it easier to keep track of savings and minimise admin when changes do occur. However, it’s important to understand if pensions have additional benefits, how they’re performing, the costs associated with consolidation and note that there are sometimes benefits to taking smaller pots first. In some cases, keeping separate pensions makes more sense, depending on the providers and your goals.
Keeping track of pension savings is just a small part of retirement planning. Understanding how pensions, and other assets, can combine to create an income in retirement can be difficult. Please contact us to discuss your retirement plans.
Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.
The Financial Conduct Authority does not regulate Workplace Pensions.