More than one in five workers (22%) believe they have lost a pension pot, with total misplaced retirement savings likely to exceed a staggering £50 billion, according to new research.
Analysis by the Centre for Economics and Business Research (CEBR), on behalf of PensionBee, reveals that an estimated 4.8 million pension pots are already missing in the UK, with that figure set to rocket by 130% by 2050.
Misplaced pensions are becoming an increasingly big problem, as workers switch jobs and accumulate multiple pension pots due to the government’s auto-enrolment scheme. Workers sometimes forget about their hard-earned pensions and fail to keep track of them, especially if they don’t update their address with their pension provider(s) when they move house.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
According to a survey of 2,000 UK adults, younger workers aged under 35 have accrued a higher average number of pensions (2.4) than mid-career workers (35 to 54 years old; 2.1) and older workers (+55 years old; 1.7) despite a shorter career history.
Today’s youngest workers (age 18) are forecasted to have, on average, five pension pots by the age of 68. However, PensionBee notes that some people can accumulate a lot more, exceeding 20 separate pensions over a working lifetime.
Becky O’Connor, director of public affairs at PensionBee, calls the amount of money in lost pensions “eye-watering”, and warns it will “reach national crisis levels over the coming years”.
She comments: “This research suggests the problem of lost pots is growing more urgent every year. The government is working on a number of solutions to help solve it, including pension dashboards and new ‘pot for life’ proposals. For anyone who loses track of pensions, the result can, unfortunately, be a poorer retirement.”
Christopher Breen, head of economic insight at CEBR, says younger people are moving jobs more frequently than previous generations, which “will lead to a higher number of pensions being accrued. This is before accounting for the role of auto-enrolment”.
He adds: “It’s important the government provides support and guidance for people to manage their pensions efficiently. With a rapidly ageing population, a healthy private pension system is vital for the long-term sustainability of public finances.”
How to find lost pensions
A “lost” pension pot is defined as one in which the connection between the owner and the pot is currently cut off. However, it’s important to note that this doesn’t mean these pension pots are lost forever, as they are likely recoverable.
To trace a pension, you can contact your pension provider and request the latest account statements or access to your online account. If you’re not sure who the pension provider is, get in touch with your old employer to find out.
You can also use the government’s free Pension Tracing Service, where you can search your previous employers to help find your pension providers’ names and contact details. Gretal is another tracing service, which you can also use to find lost pensions as well as lost investments, bank accounts and child trust funds.
To avoid losing track of pensions in future, make sure you keep hold of old paperwork, employer and pension provider names and policy numbers - and if you move house, tell your pension provider so they don’t lose track of you. If you would prefer to keep your pensions together - rather than having lots of different pots - consider consolidating them in one place.
Check out our guide to combining pension pots to see if it makes sense for you, anything to watch out for, and how to actually do it.
“Pot for life” proposals
Employees have been auto-enrolled into workplace pension schemes since 2012 and while this ensures people are putting money away for retirement, it means they build up multiple pots every time they move to a new employer.
The government is now looking at launching a “pot for life” system to help workers keep track of their retirement savings as they move jobs.
The chancellor unveiled a consultation in last year’s Autumn Statement looking at moving to an Australian-style system where the employee chooses the pension scheme that contributions go into, making it easier to keep track of their retirement savings as they move jobs and climb the career ladder.
Supporting documents released by the Treasury alongside this month’s Spring Budget stated that the government would “undertake continued analysis and engagement” on the policy. But there has been no mention of when the reforms will be implemented.
Andrew Marker, head of retail pensions at Vanguard, Europe, welcomed the initiative, saying: “A ‘pot for life’ would allow individuals the opportunity to take control of their pension, making it easier to plan for the future and to ensure their savings are being invested with their future goals in mind.”
