How employees can track down lost pensions and consolidate.

According to new research, at least 4.8 million pension pots are considered to be ‘lost’ among the UK population with 1 in 10 workers believing they could have lost a pension pot worth more than £10,000^[1]. One of the main reasons for this is because a person will have on average 9 jobs^[2] in their lifetime, so could easily end up with many different pension pots with several providers which can easily be forgotten about.

Jonathan Watts-Lay, Director, WEALTH at work, a leading financial wellbeing and retirement specialist, comments, “It is easy to see why so many pension pots get lost, as updating pension contact details may be the last thing someone thinks about when they change jobs or move house.”

He continues, “However, it isn’t difficult to track old pensions down, it doesn’t cost anything and could make a big difference to how much income someone has in retirement. Auto Enrolment was brought in in 2012, 12 years ago, so many people will have a pension from employers since then. It is worth anyone who thinks they may have a lost pension to put in a little bit of time to check if one of the 4.8million lost pension pots could be theirs.”

How employees can track down lost pensions

1. List of all previous jobs – Make a list of all previous employers. It might be useful to go back through old paperwork such as payslips, P45s, P60s, CVs and job applications.
2. Online research – If contact information isn’t available for an old employer, they can be tracked using the Government’s Pension Tracing Service – (www.gov.uk/find-pension-contact-details).
3. Previous Employers – Get in touch with previous employers to find out if they have any details. If they don’t exist anymore contact Companies House (www.gov.uk/government/organisations/companies-house) or if a charity, contact the charity register (www.gov.uk/find-charity-information).
4. Up-to-date statements – Ask for an up-to-date statement, so the value of the pension is known and the correct paperwork is recorded.

Is consolidation a good idea?

Once any lost pensions have been located, if there are a number of schemes, it might make sense to consolidate them. This means combining all (or most) of the pension pots into one. This really only applies to defined contribution (DC) pension schemes where there is a ‘pot of money’ to use for retirement. DB schemes (also known as final salary schemes) should probably remain separate. Anyone considering consolidating their DB scheme would be required to seek regulated financial advice at their own cost if the transfer value is greater than £30,000^[1].

Jonathan Watts-Lay explains, “Bringing all pensions together into one pot isn’t just about making it easier to manage. Different pensions could be invested in very different ways, which may mean someone is taking more or less risk with the investments than they are aware of.”

He continues, “Consolidating pensions means that it isn’t necessary to check the performance of multiple accounts, it could save money on the fees charged, and also ensures that there is a joined-up investment strategy which matches the amount of risk someone is prepared to take.”

What risks are there when consolidating pensions?

Jonathan Watts-Lay comments, “It is important to check if there are any valuable benefits which would be lost when leaving a provider, for example, some might have guaranteed annuity rates, a protected pension age, or enhanced tax-free cash. It is also important to check if there are exit fees to leave a provider as this may influence your decision.”

He continues, “It is important to ensure that the choice of investment options available are right, that it is possible to access the pension in the future in a suitable way, and that the provider gives the pension income flexibility needed.”

How to consolidate and how much does it cost?

Jonathan Watts-Lay explains, “To consolidate pensions, individuals should get in touch with the pension provider chosen to transfer into. This could be a current workplace pension scheme or another private pension arrangement. They will ask for details including the policy numbers and provider names of all the pensions to be consolidated. This information will be available on the paperwork and statements. The pension scheme chosen to transfer into will then begin the process of arranging for all pensions to be transferred into one plan.”

He continues, “The costs of this can vary but bringing all pensions together may reduce some charges as some providers charge a lower percentage the more that is invested. Check all charges with the provider chosen to transfer into, including charges for advice, setting up the new scheme, platform charges, dealing and transactional charges (including those to access funds via drawdown) and investment management charges.”

Some pension consolidations are taking a long time to happen. What is causing the delay?

Jonathan Watts-Lay explains, “The time it takes to transfer a pension depends on the method different providers use. Some still send paperwork through the post, which can be a lot slower than secure electronic methods. Additionally, in November 2021, new measures were put into place to protect pension savers from scams which means that providers are now able to flag or block transfers which show signs of a potential scam. To prevent the transfer being flagged, it is important to ensure that as much information as possible is provided to reassure the provider that leaving is a legitimate transfer.”

[1} https://www.pensionbee.com/uk/press/risk-of-pensions-being-lost

[2] https://standout-cv.com/career-change-statistics-uk#:~:text=insurer%20Liverpool%20Victoria.-,Average%20number%20of%20jobs%20in%20a%20lifetime%20UK,work%20for%206%20different%20employers

[3] https://www.fca.org.uk/consumers/pension-transfer-advice-what-expect