Unclaimed pension pots: are your employees missing out?

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Some of employees might have a lot to gain from tracing their old pension pots. Especially if they have frequently changed jobs or moved home – the two main reasons why people lose track of them.

Almost three million pots are not matched to their owner. In total these lost pensions are worth £26.6 billion – the equivalent of nearly £9,470 per pot, estimates the Pensions Policy Institute (PPI).

The scale of lost pension pots has increased by £7 billion in just four years, according to the study Lost Pensions 2022: what’s the scale and impact?, published by the PPI.

This problem is also an opportunity. By finding how much money they have in old pensions – and therefore how much they have saved in total – employees will have a far better understanding of how much more they might need to save in order to retire comfortably.

Employees will hopefully feel more in control of their long-term savings and be better able to plan, leading to increased financial wellness among your workforce.

This is one of the reasons why tracing old pensions is so important – and something employers should encourage their employees to do.

Managing and finding old pension pots

The number of people with lost pension savings is likely to increase. This is due to work patterns continuing to evolve (the average person has around 11 jobs over their lifetime), the increased frequency with which younger generations move house and the introduction of automatic enrolment.

In fact, the government predicts there could be as many as 50 million misplaced pension pots by 2050. The good news is it is becoming easier for people to trace old pensions.

All pension providers should send your employees a statement each year, telling them how their pension is performing and keeping them up-to-date with everything they need to know.

Whenever moving to a new address, employees should try to inform their pension provider to ensure they continue to receive statements from them. It’s a simple step, yet only one-in-twenty-five people would instinctively think to tell their pension provider when they move home, found the ABI.

If employees are comfortable doing so, they should also share their personal email address with their pension provider. This ensures they can still be contacted about their pension even if they move home and change jobs.

If employees feel they have a lost pension pot, they should contact their pension provider or former employer to get the ball rolling.

All they need is the name of their employer or pension provider. If they don’t have the details of either of these, they can use the government’s pension tracing service. This can be accessed via the Standard Life UK app, which can be downloaded from the App Store or Google Play.

Combining pensions

If an employee traces a lost pension pot, or if they just want to make managing a number of pension pots easier, they could consider moving older pension pots into their current plan.

This could make it easier for them to see how their funds are performing. It will also help them to see how much they’re paying in overall, and to decide whether they want to change these payments.

Having everything in one place will also make it simpler for them to check that their pension savings are in the right kind of investments, and to change them if they’re not. It could also reduce the charges they pay.

Combining pension pots won’t be right for everyone, however. There’s no guarantee this will produce a larger investment return.

And before doing so, employees also need to check that they’re not giving up valuable benefits or guarantees. They may decide to speak to a financial adviser first, for which there will likely be a charge.

There’s more information about transferring your pension plan to Standard Life on our website, or you can visit the MoneyHelper website, where you can also find a financial adviser.

 

The information here is based on our understanding in October 2022 and shouldn’t be taken as financial advice.

A pension is an investment, the value can go down as well as up and could be worth less than was paid in.