National Pension Tracing Day is on 27 October, making now an ideal time to track down any pensions you may have forgotten about.
Several big financial services companies, including Aegon, Legal & General, Standard Life, Scottish Widows, and Royal London, join forces to raise awareness of the far-reaching problem.
The official website suggests that, in the UK, roughly 2.8 million pensions have been lost or forgotten about. With an average value of £9,500 each, there could be as much as £26.6 billion languishing in lost pots.
Job mobility has made it easier to move up the career ladder, and lose track of pensions
In the past, the traditional “job for life” saw many workers retiring with just one pension plan. Today, greater job mobility means this is no longer the case, and staying on top of pensions has become far harder.
Moving jobs isn’t the only reason you may lose track of pensions. If you move house and forget to inform your pension provider of your new address, you could also find you lose track of your retirement savings.
In fact, FTAdviser report that while 66% of people update their new address with their bank, and 89% notify their GP or dentist. Yet only 4% of people remember to inform their pension provider when they move.
All this to say, it’s easier to lose track of pension savings that you might think. So, keep reading to find out how to find your lost pensions, and why doing so could pay off.
Track down your lost pensions
If you think you may have misplaced a pension, the following three steps could help you to track them down.
1. Sort through old paperwork
Your provider should send you an annual statement, so check through any old correspondence and emails to find the details. If you’ve had a personal pension, look through your bank statements, checking for details of payments to a pension provider.
2. Reach out to old employers
Get in touch with past employers and ask them who the workplace pension provider was. Make sure you have a note of your rough dates of employment and your National Insurance (NI) number to hand.
If you don’t know where to start, work through your CV and contact each employer on the list to ensure you don’t miss any previous employer.
Once you know who your previous pension was with, you should be able to contact the provider and ask them to help you retrace down your fund. To match you with the right pot, the provider may need to know your NI number, employment details, and previous home addresses.
3. Use the Pension Tracing Service
If you don’t have contact details for a particular scheme, use the government’s pension tracing website to help you find your lost pensions.
Simply enter the details you remember of your former employer or personal pension provider and let the system do the rest.
Though the service won’t tell you whether you have a pension, or what its value is, it should provide you with details of which organisation you need to contact.
Once you’ve relocated all your retirement savings, you may wish to roll them into one easy-to-manage fund
Once you’ve tracked down all your pension pots, it may be worth spending a little more time consolidating all your savings into one easy-to-manage fund.
Consolidating could help reduce pension paperwork
Consolidating multiple pots into a single pension fund could save you time and money over the longer term.
With only one scheme provider to deal with, you’ll have just one set of paperwork to keep track of and one set of contact details to remember.
Plus, when the time comes to take your pension, you can receive a single pension quote for the whole amount. This may allow you to compare your options and make it easier to work out the best choice for you.
Older pension plans often have high charges or little flexibility
Older pension schemes may have higher charges compared to current low-cost alternatives. Once you find your forgotten pensions be sure to check how much you are being charged in fees.
In 2015, a government cap of 0.75% was introduced, meaning defined-contribution workplace pensions used for automatic enrolment mustn’t exceed that set amount.
However, this rule doesn’t apply to older schemes. In fact, according to the Times Money Mentor, some older schemes could charge an annual fee of 2%.
You might also find that newer schemes offer a greater fund choice, possibly with the option to align your investments with your values on issues such as sustainability or climate change.
Consolidating your pension savings isn’t the right move for everyone
While you may be keen to act to ensure you don’t risk losing your retirement saving again, there are three important factors to consider:
You might pay more tax
There are tax implications to finding and consolidating your pensions. Any income you take beyond your tax-free cash entitlement (usually 25% of your pot’s value) is subject to Income Tax.
Taking a larger pot in one go might push you into a higher tax bracket. This could result in you being taxed at 40% or even 45% on a portion of it.
Factor in transfer charges
You may be charged a transfer fee. So, you’ll need to weigh up the size of the charge against the potential benefits of the transfer in each case. We can help with that, so be sure to get in touch before you decide.
You could miss out on valuable scheme benefits
If you’re a member of a final salary (defined benefit) scheme, you may not receive the same benefits if you leave. For example, your final salary scheme may provide protected tax-free cash (TFC) or a protected lower pension age that you could lose by transferring out of the scheme.
Likewise, if you have a pension with guaranteed benefits these may no longer be available if you transfer out. You’ll need to review these benefits against the comparative gains of transferring.
There are strict rules around final salary pension transfers, so it’s crucial that you seek expert advice. We can refer you to a Pension transfer Specialist who may be able to assist you with this.
Get in touch
With multiple jobs throughout a career now the norm, you could find yourself with multiple small pension pots spread across various providers. Finding these pots could make a significant difference to your retirement plans, including when you retire and the lifestyle you can afford to live.
If you’re struggling to find lost pension funds or you’d like to discuss whether consolidation could be the right option for you, please get in touch.
Email contactme@kbafinancial.com or call us on 01942 889 883.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes, which cannot be foreseen.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
Workplace pensions are regulated by The Pension Regulator.
Approved by The Openwork Partnership on 04/10/2024.
