A substantial number of individuals in the UK are losing track of their private and workplace pensions, with two out of five people reportedly unaware of the full extent of their retirement savings. This lack of awareness contributes to a growing problem of "orphaned pots," estimated by the Pensions Policy Institute to be 3.3 million, collectively worth £31.1 billion.
Several factors contribute to this trend. The auto-enrollment system, which automatically enrolls employees into a new pension with each job change, leads to an increasing number of individual pension pots. Many savers struggle to keep track of these accounts as they move between employers. Additionally, a general tendency to lose pension information and failure to update contact details with pension providers exacerbate the issue.
A survey by Aegon found that 16% of adults are completely unaware of where any of their pensions are held, while 20% have only managed to track some of their pots. Another 24% stated they do not have any private pensions, though this could also be due to forgotten old retirement funds.
The complexity of understanding pension communications is another barrier. While 72% of pension savers report opening their annual statements and 69% claim to read them, only 55% feel these statements help them determine if they are saving enough for retirement. Furthermore, 30% of pension savers never check on their investment allocation within their pension pots.
Pension providers like Aegon offer services to help locate lost workplace pensions. The industry also has an incentive to reunite savers with their forgotten funds, as managing dormant accounts with outdated contact information incurs administrative costs. Pension dashboards, which aim to provide a consolidated view of all savings in one place, are also anticipated to become a valuable tool for savers once publicly accessible, though a launch date has not yet been announced.
For those who have lost track of their pensions, financial guidance suggests registering current contact details with providers and ensuring these are updated with any future address changes. Keeping old pension paperwork, which includes reference numbers and values, is also crucial. In light of pensions becoming part of inheritance tax calculations from April next year, securely storing this information is vital for executors of estates.
Merging pension pots can sometimes reduce fees and paperwork, but it is not always advisable. Savers risk losing valuable benefits and should carefully consider the implications before combining funds. This is Money offers a guide to tracing lost pensions, providing tips from pension columnist Steve Webb.## SIPPS: Invest to Build Your Pension
Several providers offer Self-Invested Personal Pensions (SIPPs) with varying fee structures and investment options. These include AJ Bell with a 0.25% account fee and a full range of investments, and Hargreaves Lansdown offering free fund dealing and reduced account fees. Interactive Investor provides services from £5.99 per month with £100 of free trades, while InvestEngine offers fee-free ETF investing and a £100 welcome bonus. Prosper also offers no account fees and refunds on 30 ETF fees.