Millions of workers risk being left £9,000 out of pocket in retirement – move to make NOW to avoid losing cash
MILLIONS of workers risk being left £9,000 out of pocket in retirement, but there’s an easy move you can make to avoid it.
When you join a company, you are “automatically enrolled” in a new pension, so if you have a few jobs in your career it could be easy to lose track,
It urns out this is quite common, according to research conducted for Hargreaves Lansdown (HL).
It found that almost 40% of people they surveyed admit they are unsure where their pensions are held, 22% are not sure, while a further 16% said they don’t know.
Losing track of your various pots is a dangerous game because if you lose it completely, you could be £9,000 out of pocket.
Helen Morrissey, head of retirement analysis at HL: “It’s easy to put off tidying up our pension admin, but doing so risks us losing out in retirement.
“Almost 40% of people admit they don’t know where their pensions are held, and this puts them at extra risk of losing track of them altogether.”
Further research found that the older the saver, the more likely they are to know where their pensions are.
In younger age groups like 18-34-year-olds half of them admitted they didn’t know or were unsure where their pots are.
“This could be because older generations have been less impacted by auto-enrolment and so have fewer pensions to begin with,” Helen explained.
“Others may have decided to keep track to minimise the risk of losing them in the run-up to retirement.”
You might think that because you weren’t in the job very long, the pension isn’t worth keeping an eye on.
But pots do grow over time due to the benefits of investment growth.
The most recent data from the Pensions Policy Institute estimates there is around £26billion of lost pension money washing around the system, with the average lost pension being worth over £9,000.
Why do pensions go missing?
If you then move jobs, you’re enrolled into a new company pension.
This has created a situation where many workers are juggling multiple pensions and there are concerns millions of Brits may have forgotten about some of their older pots.
If you lose the paperwork for your old schemes and forget which provider they are with, it can be difficult to track them down.
The Government is working on a number of ways to help resolve this problem.
One of those is the beleaguered “pensions dashboard” – a facility where workers will be able to view all of the pension pots they have accumulated over their lifetime in one place.
After years of delays, pension schemes will have to be hooked up to this dashboard by October 31 2026.
The Government also recently confirmed it intends to push ahead with “pot for life” plans – as revealed by The Sun.
These proposals could include workers maintaining one pension provider throughout their career, or having a pension pot that follows them around from job to job.
TRACKING DOWN OLD POTS
Helen explained: “In the meantime, there are things you can do to make sure you aren’t losing track of all important pension money.
“Take the time to make a list of where you’ve worked and check to see if you have pension paperwork for each one.”
There are a few ways you can track down your old pots, such as the pension tracing service app Penny.
The platform helps people find their lost pots and offers plans and pension investment options.
It’s worth noting that Penny charges a 0.75% fee each year on the value of the pension which is called the annual management charge.
There are several services available to help you track them down, including the government’s online Pension Tracing Service (or call 0800 731 0193).
You can also try ringing your old employers’ HR department to ask for the details of your old pensions.
Pension firms including AJ Bell have their own services to locate old pots.
When speaking to a provider, give as much information as possible like the dates you were employed and when you paid into a pension, as well as your National Insurance number.
This will help them track down your pot faster.
Top tips to boost your pension pot
DON'T know where to start? Here are some tips from financial provider Aviva on how to get going.
- Understand where you start: Before you consider your plans for tomorrow, you’ll need to understand where you stand today. Look into your current pension savings and research when you’ll be eligible for the state pension, and how much support you’ll receive.
- Take advantage of your workplace pension: All employers are legally required to provide a workplace pension. If you save, your employer will usually have to contribute too.
- Take advantage of online planning tools: Financial providers Aviva and Royal London have tools that give you an idea of what your retirement income will be based on how much you’re saving.
- Find out if your workplace offers advice: Many employers offer sessions with financial advisers to help you plan for your future retirement.
AVOID LOSING CASH
A good way to keep track of your pensions is by combining them into one place.
If you do decide to consolidate your pots, choose a new scheme and ask it to combine your old pots.
Give them the details of your old schemes and they should do the rest of the work for you.
Putting all your money into one modern pension scheme could also mean you pay less in fees.
However, before transferring out of any old schemes, check you won’t lose any benefits you might need.
Helen said: “Moving all your pensions into one pot can slash the fees you pay and mean you retire with a much larger sum saved.
“However, it’s vital you check that you aren’t losing out on valuable benefits by doing so and seek advice if necessary.”
How do I consolidate my pension?
IF you have several workplace pensions that you're no longer paying into, you might be better off consolidating them into a single pot.
There are several advantages to this.
The first is that by having your savings all in one place, you’ll only pay one set of fees.
You can also choose which pension provider you want to transfer the different savings to, so you can pick the best one for you.
It also makes it easier to keep track of your money.
You might want to move all your money to whichever of your existing pots has the best fees, or you could move it all to your current employer pension (if you have one).
Alternatively, you may wish to move money to a private pension or use a consolidator service, such as Pension Bee, Aviva, or Wealthify.
Make sure you compare and contrast your options carefully so that you’re picking the best home for your savings.
You’ll need to look at fees but also might want to consider the investment options available.
If any of your pots are over £30,000 you’ll need to get independent financial advice, but even if you have lots of smaller pots you should consider speaking to an independent financial advisor (IFA).
You can use Unbiased or VouchedFor to find a recommended advisor near you.
Also ask whether you’ll be charged a fee to exit your existing provider and to join your new provider, plus whether the age at which you can access your pension is different – for most people this is currently 55, but is set to rise to 57.
You also need to ensure the pension you’re leaving doesn’t come with valuable added perks, or you could lose out.
Stay alert for pension transfer scams as fraudsters often target people transferring their pension with promises of investments that are too good to be true.
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