Why bother? How pension apathy could be costing employees thousands

Many people can’t be bothered to trace old or mislaid pensions, even even though the process has never been easier.

October’s coming to an end, the days are getting shorter, and the clocks have just gone back. And while most of us probably spent that extra hour in bed, here’s a thought: what if that hour had instead been spent doing something productive and potentially lucrative – like tracking down a lost pension?

As it happens, yesterday (26 October) was National Pension Tracing Day. Research from the PPI estimates that there could be about 3.3 million lost or forgotten pension pots out there, worth an average of £9,500 each – more than £31.1 billion in total. That means tracking down a lost pension could prove highly valuable to many people – time well spent, surely?

Unfortunately, though, many people simply don’t bother trying to trace pensions, even though the process has never been easier. So, what’s really going on? And how can we encourage employees to see the value of combining their pensions?

The ‘why bother?’ mindset explained

With an average of nearly £10k sitting in each unclaimed pension, you would think employees would be easily incentivised to track down their pensions. But there’s a bigger issue at play: the extent to which people undervalue their pensions compared with, say, their regular savings or their salaries.

To put this into context, we asked people how much money would need to go missing before they’d take action. Seven in ten (70%) people told us they would contact their bank if less than £50 went missing from their bank account. An even higher percentage (72%) said they would contact their employer if they were underpaid by £50 or less.

Yet when it comes to pensions, the numbers fall dramatically: just one in ten (10%) said they would bother trying to track down less than £50 worth of missing pension savings. Perhaps most concerningly, almost one in twenty (4%) said they wouldn’t bother trying to track down a missing pension pot no matter how much it was worth.

Clearly, there is a major disconnect here, which illustrates people’s apathy towards pensions. This ‘why bother?’ mindset is more to do with perceived value than anything else. For instance, an employee might have five separate pension pots, each worth £500. Individually, none of them feels significant enough to warrant the effort of tracking down. But collectively, those five pots could be worth £2,500 – a sum that would probably make them sit up and take notice.

Why employers should care

Employers get value from pension schemes when staff engage with, and really value, the benefit. Disengaged employees with multiple pots aren’t maximising their retirement savings, aren’t appreciating workplace benefits, and aren’t making informed financial decisions.

And they’re less likely to engage with their current workplace pension. They can’t see the big picture of their retirement savings, so they don’t understand the true value of what they’re building.

The consolidation opportunity

By actively helping employees consolidate their scattered pension pots, you’re fundamentally changing their engagement with retirement saving. When someone with five pots of £3,000 each sees them consolidated into one £15,000 pot, something shifts. Suddenly, their pension crosses that ‘bother threshold’ and becomes meaningful enough to engage with.

Recent data from NatWest Cushon shows just how powerful the right approach can be. During the pilot launch of the digital pensions assistant, Iris, NatWest Cushon saw 3.5 times more initiated pot transfers per targeted member. This goes to show that when consolidation is made easy through app-based journeys with targeted communications, engagement and positive action increase dramatically.

Three practical steps for employers

Here are a few things you can do to make it easier for employees to consolidate their pensions:

Encourage employees to track down lost pensions: National Pension Tracing Day may only happen once a year, but you can still encourage your employees to track down any lost pension savings. They can use the government’s free Pension Tracing Service.
Help employees see the big picture: Provide calculators or tools that help them understand their total pension wealth, not just what’s in their current scheme. When they can see the collective value, they’re more likely to act.
Partner with providers who make consolidation easy: Choose pension providers who offer technology that makes consolidation simple, with in-app journeys and smart nudges that guide employees without overwhelming them.