‘This is not the fault of the saver’: How to track lost pensions as billions go missing

Pensions: Money Box caller talks impact of age differences

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Pension savings regularly go missing in the modern working world as employees jump between companies. Automatic enrolment rules force the majority of workers to set up new pension schemes with each employer they work for and this has led to vast amounts of wealth going missing.

More than 200,000 people placed calls to the DWP in the last four years hunting down lost pensions, recent research from Hargreaves Lansdown has shown. A number of experts believe the amount of lost pensions going unclaimed sits at around the £20billion mark.

Hargreaves Lansdown, who based the study off Freedom of Information requests submitted to the DWP, found more than 60,000 people tried to track down lost pensions in 2021.

A previous study undertaken by the company found more than a quarter of workers had more than one pension plan and it said a retirement crisis was “looming” in the face of millions of workers being left without sufficient funding.

The DWP itself has also said the shortfall could result in up to 50 million lost pensions by 2050. As a result of this, the Government has urged workers to ensure they keep track of their pots.

This may prove to be easier said than done however as guidance has been issued to both the industry and consumers on what changes need to be seen.

Chieu Cao, CEO of Mintago, argued the introduction of auto enrolment workplace pensions in 2012 is, in fact, “part of the problem” with missing pensions. While being a good idea in principle, Mr Cao said that by automating the process, it resulted in workers stopped engaging with their retirement strategies, perhaps even becoming indifferent to their pensions.

Mr Cao warned this “out of sight, out of mind” approach will be damaging, especially as Britons tend to change jobs an average of 12 times throughout their careers, and this number is “getting larger all the time”.

He continued: “The result is that people are accumulating pension pots with different employers. Where are those pensions held, how are they performing and what are they worth? For many people, the answer is ‘I don’t know’.

“This is not the fault of the saver. It is a reflection on the rather opaque world of pensions.”

To remedy these issues, Mr Cao explained the wider pension industry needs to step up.

He said: “The pension industry must do more to encourage better pension engagement.

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“Pension providers and regulatory bodies could, for example, ensure that clear, jargon-free information about the benefits of pension saving is more easily accessible. It would also be beneficial to make it easier for people to access information about their own pension.

“After all, people are likely to engage when they see the value of their various pots in real terms.

“Indeed, understanding how much people have saved already will prompt them to make informed financial decisions in the future – such as increasing their pension contributions or consolidating their pots. Here the employer must play a role in providing their staff with details about and greater control over their pension contributions.”

While the industry does have its part to play, it should also be remembered that individual workers should still take ownership and accountability for their pensions. Mr Cao went on to break down what steps savers can take to improve their retirement planning engagement.

“Early pension engagement is key”

Fortunately, there are many tools available to savers who are keen to track down any lost pensions they have.

Mr Cao explained: “Taking advantage of pension hunter tools, or asking a financial adviser to help them track down their pension will certainly be beneficial. For example, impartial platforms like Mintago, a benefit provided by employers for their employees, search for lost pensions on users’ behalf and display information about lost pensions.

“Having access to the exact value of each pension pot will enable people to make more informed decisions about their future finances. Indeed, Mintago alone has helped track down over £4million worth of lost pensions in the past year, with the average pot worth £10,000.”

To really get ahead of the curve, savers could be proactive and work with their employers for optimal solutions. Where this is done correctly, both the employer and employee could benefit.

Mr Cao concluded: “People could also take steps to ‘save smarter’. For example, people could speak to their employer about the possibility of taking part in a salary sacrifice pension scheme.

“This means that employees agree to receiving a slightly lower income, and the employer tops up their workplace pension pot with the equivalent amount. The benefits to this are two-fold; not only will it mean they will essentially enjoy a larger pension pot in the future, but the employer will also save on National Insurance contributions.

“What’s more, there are various tools and platforms available to help businesses adopt them.

“Early pension engagement is key to achieving a financially secure retirement. But this is only possible if the right tools, information and support are in place to ensure people of all ages can get a firm handle on their retirement finances.”

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