- 2.8m lost pension pots in the UK, worth around £26.6 billion
- WEALTH at work explains how employees can track down lost pensions and provides guidance on whether to consolidate
The total value of lost pension pots has grown from £19.4 billion in 2018 to £26.6 billion in 2022. There are 2.8 million lost pension pots sitting unclaimed because they’ve been simply lost or forgotten about. One of the main reasons for this is because a person will have on average 12 jobs in their lifetime, so could easily end up with many different pension pots with several providers which can easily be forgotten about.
How employees can track down a lost pension
1. List of all previous jobs – Employees can start by making a list of all the places they have worked. It might be useful to go back through old paperwork such as payslips, P45s, P60s, CVs and job applications.
2. Online research – Those who don’t have the pension information for an old employer, can try to find them using the Government’s Pension Tracing Service (www.gov.uk/find-pension-contact-details).
3. Previous Employers – Individuals should get in touch with their previous employer to find out if they have any details. If they don’t exist anymore and if they worked for a company they can contact Companies House, or if they worked for a charity, they can contact the charity register.
4. Up to date statements – Once they have tracked them down, they should ask for an up-to-date statement so they know how much their pension is worth and have the correct paperwork.
Should employees consider consolidating their pensions?
Once employees have located any lost pensions, if they have several schemes and struggle to keep track of them all, it might make sense to consolidate them. This means combining all (or most) of their pension pots into one. This really only applies to define contribution pension schemes where you have a ‘pot of money’ to use for retirement. Whilst individuals could also consider Define Benefit schemes (also known as final salary), as these are not reliant on a ‘pot of money’ and guarantee to pay a certain amount of income in retirement, they should probably remain separate. In any event, if individuals are considering this option, they would be required to seek regulated financial advice at their own cost if the transfer value is greater than £30,000.
Jonathan Watts-Lay explains, “Pension consolidation isn’t just about making it easier for someone to manage their finances. Their different pensions could be invested in very different ways, which may mean they are taking more or less risk with their investments than they realise.”
He continues, “Consolidating pensions means that you don’t have to check the performance of multiple accounts, it could save money on the fees charged, and also ensures a joined-up investment strategy which matches the amount of risk that someone is prepared to take.”