How to track down and consolidate lost pensions – and why it pays
The total value of lost pension pots has grown from £19.4bn in 2018 to £26.6bn in 2022. There are 2.8 million lost pension pots sitting unclaimed because they’ve been simply lost or forgotten about.
One of the main reasons for this is because a person will have on average 12 jobs in their lifetime, so could easily end up with many different pension pots with several providers which can easily be forgotten about.
How employees can track down a lost pension
1. List all previous jobs
Employees can start by making a list of all the places they have worked. It might be useful to go back through old paperwork such as payslips, P45s, P60s, CVs and job applications.
2. Online research
Those who don’t have the pension information for an old employer can try to find them using the Government’s Pension Tracing Service.
3. Previous employers
Individuals should get in touch with their previous employer to find out if they have any details. If the company no longer exists it can be tracked through Companies House, while charities are on the charity register.
4. Latest statements
Once they have tracked a pension down, they should ask for an up-to-date statement so they know how much their pension is worth and have the correct paperwork.
The consolidation question
Once employees have located lost pensions, if there are several it might make sense to consolidate them. This means combining all (or most) of their pension pots into one. This really only applies to defined contribution pension schemes where you have a pot of money to use for retirement.
While individuals could also consider defined benefit schemes (also known as final salary), as these are not reliant on a pot of money and guarantee to pay a certain amount of income in retirement, they should probably remain separate.
If individuals are considering this option, they would be required to seek regulated financial advice at their own cost if the transfer value is greater than £30,000.
Jonathan Watts-Lay, director, WEALTH at Work says: “Pension consolidation isn’t just about making it easier for someone to manage their finances. Their different pensions could be invested in very different ways, which may mean they are taking more or less risk with their investments than they realise.”
He continues: “Consolidating pensions means that you don’t have to check the performance of multiple accounts, it could save money on the fees charged, and ensures a joined-up investment strategy that matches the amount of risk that someone is prepared to take.”
Beware high fees
“It is important for employees to check that they won’t lose out on valuable benefits or be charged expensive exit fees if they leave a provider,” Watts-Lay says. For example, some might have guaranteed annuity rates, a protected pension age, or enhanced tax-free cash.
“Employees also need to ensure that the choice of investment options available are right for them and they should consider how they want to want to access their pension in the future, and whether the provider they want to use gives them the pension income flexibility they are looking for.”
The cost of consolidation
Watts-Lay says: “The costs of this can vary but bringing pensions together may reduce some charges as some providers charge a lower percentage the more that is invested. Individuals should ensure they check all charges with the provider they intend to transfer to, including charges for advice, setting up the new scheme, platform charges, dealing and transactional charges (including those to access funds via drawdown) and investment management charges.”
However, some pension consolidations can take a long time.
Watts-Lay says: “The time it takes to transfer a pension depends on the method different providers use. Some still send paperwork through the post, which can be a lot slower than secure electronic methods.
“Also, in November 2021, new measures were put into place to protect pension savers from scams which means that providers are now able to flag or block transfers that raise their suspicions. To prevent the transfer being flagged, it is important to ensure that individuals provide as much information as possible to reassure the provider they are leaving that it is a legitimate transfer.”
In partnership with WEALTH at work
WEALTH at work is a leading financial wellbeing and retirement specialist - helping those in the workplace to improve their financial future.
