Millions of Lost Pensions: Billions Left Untracked in UK Savings
A new report reveals over three million dormant pension pots, collectively worth £18.7 billion, are unaccounted for across the UK.
An estimated £18.7 billion in savings remains inaccessible across more than three million dormant pension funds in the United Kingdom, according to a new report by the Pensions Policy Institute (PPI).
The average value of these lost pots is £6,220, but for individuals aged 55 to 74, the average rises to £10,710, representing a potential loss of 38% of their expected retirement income. The majority of these unclaimed funds, approximately 2.5 million pots totaling £12.9 billion, are held by individuals under the age of 55. These younger savers are likely to track down their funds as they approach retirement age.
People most commonly lose track of pension pots when they move and fail to inform their previous employers' pension schemes of their new address. The PPI suggests that the distribution of lost pots across age groups is influenced by regulations that restrict access to pension savings for those under 55 (a limit set to rise to 57 in 2028), as well as common patterns in employment, the introduction of automatic enrollment, and increased job mobility among younger workers.
A pension is defined as lost by the PPI when a provider cannot contact the owner because they are no longer residing at their last known address, although some schemes employ additional criteria to mark members as missing.
Future Solutions and Current Challenges
Pensions dashboards, intended to provide savers with a consolidated view of all their retirement funds at a glance, are anticipated to help many individuals locate forgotten or neglected pension pots. While a definitive launch date for these dashboards has not yet been set, they are currently projected to become publicly available between 2027 and 2028. The PPI survey, supported by the Money and Pensions Service, a government-backed entity, indicated that only about 8,000 lost pots belong to individuals over 75. However, pensions that remain unclaimed beyond retirement age may be more likely to be permanently lost.
The report also highlighted a gender disparity in lost pension wealth, with women's average lost pension value being over 20% lower than men's, at £5,370 compared to £6,830.
Dr. Suzy Morrissey, Deputy Director at the PPI, stated that lost pension pots continue to be a significant concern for savers, providers, and policymakers. Oliver Morley, CEO of the Money and Pensions Service, commented that the MoneyHelper Pensions Dashboard, expected in the 2027/28 financial year, aims to address this issue by offering a single overview of pensions, including those individuals may have lost touch with.
Steve Watson, director of policy at workplace pensions provider Cushon, noted that lost pension pots have not vanished but have simply become untracked, often due to outdated contact information held by providers.
Strategies for Locating Lost Pensions
Individuals seeking to find old pension pots are advised to start by reviewing any existing paperwork, which may contain crucial policy numbers. It is also recommended to investigate the status of former employers, checking if they are still trading or if their name has changed. Resources such as Companies House and HMRC's National Insurance records can be helpful in this regard.
The government offers a Pension Tracing Service, though it has limitations. It's important to exercise caution with commercial tracing services, which may charge fees or be fraudulent. Savers should also investigate if their pension provider was acquired by another company or if the scheme assets are held by an insurance company or a compensation scheme like the Pension Protection Fund.
Finally, utilizing personal networks, such as former colleagues who may still be in contact with the pension scheme, can be a viable strategy. Social media platforms may also assist in reconnecting with former workmates.
While consolidating multiple pension pots can reduce fees and administrative effort, it's not always advisable, as it may lead to the loss of valuable benefits. Savers are encouraged to carefully consider the implications before merging their funds.