When the government introduced workplace pension auto-enrolment in 2012, it was supposed to help Britain’s workers better prepare themselves for their future retirement. But with millennial and Gen Z workers more likely to switch jobs and careers than previous generations, billions of pounds worth of workplace pensions are being left behind as people change jobs.
The Association of British Insurers (ABI) estimates that around £19.4 billion worth of workplace pensions have been misplaced or forgotten about. That’s 1.6 million pension pots worth £13,000 each. And while many people will eventually come looking for their lost savings — more than 200,000 people have contacted the Department for Work and Pensions in the last four years — some will simply be left unclaimed.
While auto-enrolment explains the number of pensions left behind, the sheer volume of the money being lost suggests a more widespread issue: a lack of financial awareness and planning.
As many as one in three people in the UK don’t feel confident when it comes to managing their finances, and this is reflected in a general uncertainty around pensions.
Just under half of working people in a 2019 Portafina survey said they understood how auto-enrolment worked, while 35 per cent said they weren’t sure what their monthly pension contributions were, despite the figure being presented on monthly wage slips.
So, while changing roles more frequently can explain why younger workers forget about some of their pensions, it’s also clear that a lack of financial confidence plays a part. This is putting more pressure on financial advisers to help recover lost pensions.
Two of the most common reasons for losing pensions are moving house and changing jobs without updating personal contact details, such as home addresses. With as many as 70 per cent of people still receiving annual pension statements by post, it can be all too easy to lose track of who pensions are with if you’re no longer receiving the correspondence you need.
Pensions can also be lost if somebody passes away without nominating beneficiaries. Unless instructions are included within someone's will, it can often fall to the pension administrator to come to a decision on how to distribute a pension. This may not always be in the way the deceased individual wished and can frustrate their relatives.
More often than not, helping your clients recover their pensions is a question of finding the right information. But from previous addresses to former employers and the pension providers themselves, letting your clients try to gather all the right information themselves can be a risk. Instead, here’s how you can help them find the right information:
Do they know how many workplace pensions they have open?
Do they know who their pension providers are? Do they have a pension plan number?
Do they know the date their pension plan(s) were set up?
Do they know of any charges they may be paying for the management of their pension pots?
Do they know the dates they entered and exited a former employer’s workplace?
Do they know if their pensions were defined benefit pensions or defined contribution pensions?
If your client can’t find the right information, there are other tools to help trace your client’s pensions.
The government’s Pension Tracing Service can help you find contact details for former employers and pension providers who may be able to offer more help in tracing a missing pension. To use the service, you will need the name of a former employer or pension provider for your client. The service will not inform you if your client has a pension or what its value is — it can simply point you in the right direction.
It may also be a good idea to encourage your client to speak to any former colleagues, as they could be more familiar with the workplace pension scheme, who the provider is and who your client could contact.
If your client has had a defined benefit pension, it may have been protected by the Pension Protection Fund (PPF), and it could be a good idea to contact the PPF.
If your client has had a personal pension, they may be able to trace it by checking their previous bank statements as these may show where your client was paying their contributions.
Whether you’ve been able to track down missing pensions or not, it’s important to encourage your client to plan for the future and to keep a closer eye on their pensions going forward. While missing pensions are a major problem, there are simple steps everyone can take to ensure they aren’t at risk of losing their hard-earned savings.
Consider consolidating pensions: if your client has lots of different workplace pensions, it might be time to consolidate them into a single, more manageable pension. This can make pensions easier to manage and even improve your client’s savings growth, but it may not always be possible — or preferable.
Consider transferring pensions: time is often money, and if your client’s savings have been in an outdated, underperforming pension scheme, they may have already missed out on substantial investment growth in other schemes.
Make pensions more accessible: from knowing pension providers and key contact information to checking annual statements, forming better habits will encourage a healthier relationship with savings.
Try a pension manager: if your clients still don’t have the confidence or desire to manage their pensions more closely, it may be time for them to try a pension manager who can keep their savings working in their interest.
With nearly £20 billion misplaced in lost or unaccounted for pension schemes, thousands of people need the right expertise and guidance when it comes to getting their savings back. From planning for the future to making the right pension choices, your advice can make a difference. Find your next clients on Unbiased.