3.6 million Britons have lost track of their pension savings
The more old pensions you do have, the easier it is to end up losing one. Tracing pensions from years ago can be a hassle. Over 3.6 million Britons admit they have no idea how many pensions they have and risk paying more in fees than necessary, according to new research.
The number of workers with small pension pots of under £1,000 has surged dramatically in recent years, as auto enrolment has allowed millions of people to benefit from workplace pensions for the first time.
It’s quite common for people to have been enrolled within different employers’ schemes over the years with each one adopting a different investment strategy. We have recently took on a new client where an element of her overall pension pot had been held in cash since 2012 as she had reached her pre determined retirement date within that scheme – often known as the normal retirement date or NRD. The default strategy was to gradually move away from higher risk assets to lower ones and eventually cash as the NRD approached. Now this may be suitable for some but for those who are looking to continue to grow their fund through retirement then a decision to move away from this style of investment should be considered.
In this instance the client only gave up work recently and her goals for retirement were growth and income, the default strategy for that scheme was not suitable for her based on her retirement objectives. As it was sat in cash the opportunity for growth over the best part of 10 years was missed – fortunately it was only on a proportion of her overall pension funds. Following advice from Watermark we were able to invest for growth and income in line with the clients preferred risk level.
Paying fees to multiple providers
However, with the average employee now changing jobs 11 times in their working life, people are increasingly building up many small pots and are often losing track, misplacing paperwork or forgetting about previous schemes they are invested in.
The Pensions Policy Institute (PPI) predicts the number of small pots will triple by 2035 to 27 million. Although the Government’s Pension Dashboard will allow people to see all of their pensions in one place when it comes into effect in a few years’ time, it will not solve the problem of savers paying fees to multiple providers across all their pensions.
Consolidate small pension pots
While savers already have the option of combining their pensions, one in 10 (10%) have no idea how to do this, while 12% say it’s just too much hassle. As a result, more than two-fifths (44%) say they’ve never bothered to track down savings from a previous employer.
Almost three quarters (72%) of Britons now support the introduction of a new system that would automatically consolidate small pension pots as they move jobs, reinforcing strong support from the industry for the change. This would make it easier for people to manage and keep track of their retirement savings, while making the system more efficient and effective for the UK’s 33 million pension holders.
Compare the features and benefits
Even if you have not had that many jobs, you may still have a number of different pensions to keep track of. Pensions can be confusing, but there is an alternative way to help keep on top of them. Pension consolidation may allow you to combine some or all of your defined contribution pensions in one place.
Consolidating your pension means fewer statements to keep an eye on, along with fewer and potentially lower management charges. However, not all pension types can or should be transferred. It’s important that you know and compare the features and benefits of the plan(s) you are thinking of transferring. It can be a complex decision to work out whether you would be better or worse off combining your pensions, so it’s essential to obtain professional financial advice.
 The research was carried out online by Opinium across a total of 5,010 adults aged 18+. Data is weighted to be representative of the GB population. Fieldwork was carried out between 12th to 18th March 2021.
 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/945319/s mall-pots-working-group-report.pdf
 https://www.pensionspolicyinstitute.org.uk/media/3545/20200723-deferred-members-final-report-for-the- website.pdf
 Finder,Pension Statistics 2021
A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS PLAN HAS A PROTECTED PENSION AGE). THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.
THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION WHICH ARE SUBJECT TO CHANGE IN THE FUTURE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.