Billions of pounds sitting in forgotten pension funds
Keeping track of your pension pot is just as important as saving for your retirement, yet one in four adults aged under 55 are believed to be at risk of losing their pension fund.
Research suggests 1.6million workers have pensions that they have lost track of, and as a result £37 billion of savings could go unclaimed in future years,
With ever-increasing living costs, the raising of the state pension age and increased life expectancy, it is vital that these long-term investments are located and are able to support you in later life.
Here at Jacobs Allen Chartered Accountants and Chartered Tax Advisors one of our core services is helping clients plan for their retirement.
Auto-enrolment means an increasing number of us are saving in traditional workplace pension schemes, while others prefer to invest in property or other assets to fund their post-work life.
However, statistics from the Office for National Statistics show that men who retire at 65 can expect to live another 19 years while the average woman will live until they are 86 – that means your retirement could be half as long as your working life.
An old pension plan could be the answer to funding that prolonged retirement, even though you may no longer be actively contributing into a former workplace pension, the fund may continue to be invested and earn interest which can rack up over the years.
The average ‘missing’ pension pot is valued at £23,000.
It might seem incomprehensible that you could forget that level of investment but when you consider that for most people, the job for life no longer exists and younger workers change jobs more frequently than ever before it is easy to see how you may neglect a fund.
How do you find out if you own a share of these missing millions?
While we can advise on how much you need to save, only you can trace unclaimed pensions and discover how much you have already set aside. Here is how we recommend you search.
Keeping track of pensions
The simplest way to keep track of any pension plans you have, particularly workplace pensions when you change jobs, is to notify your pension provider so they can easily contact you.
Keep them informed if you move house or change personal details, such as email address or phone number.
Alternatively, amalgamating your pots so they are in one place in another option. This, in theory, makes it easier to manage your savings. However, consolidating your pension may not suit other types of pension plans where exit fees can apply and valuable benefits or guarantees may be lost.
Those with defined benefit or final-salary pension plans have a set level of income based on their annual salary when they retire and it would not make sense to consolidate these.
Some employers have been known to offer incentives for people to transfer final-salary pensions but those who do so are usually worse off as a result. We recommend you speak to our team before making a decision about this.
The Pension Tracing Service is designed to help you connect with whoever may administer your old pension plans.
The free service, which was launched in 2016, allows you to search for lost workplace pension, a personal pension or a public-sector pension, such as those related to the NHS, armed forces or civil service.
You will need your national insurance number to search, and an idea of how many pensions you may have lost track of.
It is worth knowing that the tool is unable to tell you if you have a pension with a provider or how much it may be worth. It will only give you a mode of getting in touch.
Once you have the administrator’s contact details – name, address, phone number or email, get in touch and be prepared to give certain confidential details to track down your old pot.
If you are unable to trace your lost fund through the Pension Tracing Service, all is not lost, as the tool does not feature all pension plans in the UK.
The role of technology
The Government has reintroduced the Pension Schemes Bill which contains new rules for pension dashboards – an online service which should enable you to see information from multiple pensions, including the state pension, in one place.
It will collate information from multiple sources, which can be accessed whenever you like in the same way as you access an online bank or use cloud accounting software.
Pension dashboards should link to the Government’s Pension Tracing Service, putting you in full control of any pensions you have had over the course of your career.
At the time of writing, however, these are still being developed and not widely available to consumers.
Beware the scams
From exotic investments, free reviews or early cash-in offers, con artists are trying their luck and succeeding in duping retirement savers out of their hard-earned pension pots.
The Financial Conduct Authority estimated savers who fell for these frauds lost an average of £82,000 in 2018 – the equivalent of 22 years savings.
If you are considering consolidating your pensions, don’t be rushed or pressured into making any decision.
Reject any unsolicited pension offers, whether you receive them online, on social media or over the phone. Be sure you verify who you are dealing with before handing over information.
Our experts are here to advise those who are looking to invest their fund that they strike a balance between high and low-risk exposure.
We can also help you understand the tax and financial implications involved before you commit.
Contact us today for a consultation.