More people likely to lose sight of their pension pots
21 October 2018
In light of recent research which showed the UK’s lost pension pots could be worth as much as £20 billion, Aegon has warned that the situation is likely to get worse as a result of auto-enrolment.
Research from the Association of British Insurers (ABI) estimated there are collectively around 1.6 million pots worth £19.4 billion unclaimed – the equivalent of nearly £13,000 per pot. The trade body said the figure could be even higher as the data did not look into lost pensions held in the public sector or with trust-based schemes typically run by employers.
In response to the stark figures, Kate Smith, head of pensions at Aegon, said keeping track of different pension pots can be problematic.
“Today people have diverse careers often involving multiple jobs with different companies. The introduction of auto-enrolment has also led to nearly 10 million more people saving into a pension. So the issue of lost and forgotten pension pots is only going to get worse as each job comes with a pension. Many of these pension pots are tiny and easy to forget. It’s notoriously difficult for people to keep track of small pension pots, particularly at the beginning of their working life.”
Smith said saving for retirement needs to be made “as simple as possible” and the launch of the Pensions Dashboard will help people to keep track of their pensions with the additional bonus of seeing all of them in one place.
However, until the Dashboard is introduced, Smith has recommended people use the Department of Work and Pensions (DWP) tracing service to help find forgotten or lost pensions and get a state pension forecast through the government.
The ABI survey was conducted on its behalf by the Pensions Policy Institute (PPI), which surveyed firms representing about 50% of the private defined contribution pensions market. From this, PPI found 800,000 lost pensions worth an estimated £9.7 billion. It estimated that, if scaled up to the whole market, there are collectively around 1.6 million pots worth £19.4 billion unclaimed – the equivalent of nearly £13,000 per pot.
This figure is likely to be even higher as the research did not look into lost pensions held in the public sector, or with trust-based schemes typically run by employers.
The ABI said that insurance providers make considerable efforts and spend millions every year trying to reunite people with lost or forgotten pensions. In 2017 more than 375,000 attempts were made to contact customers, leading to £1 billion in assets being reunited with them. However, firms are unable to keep pace with a mobile workforce that moves jobs and homes more often than ever before, so a digital solution through the Pensions Dashboard is now more important than ever.
Dr Yvonne Braun, ABI’s director of Long-Term Savings and Protection, said that unclaimed pensions can make a real difference to millions of savers who have simply lost touch with their pension providers.
“The industry has stepped up its efforts to re-connect savers with their lost nest eggs, developing a new framework launched earlier this year to help pension providers trace ‘gone-away’ customers more consistently. But industry efforts can only go so far – we need a radical digital solution to cope with the way society is changing, or the problem will get worse.
“It is important that the Government stands by its promises to take forward the Pensions Dashboard. This project has cross-party support, with the backing of consumer groups, and could mean a more secure retirement for millions of savers.”
Anthony Rafferty, managing director of Origo, which helps build the prototype Dashboard, points out that the initiative is not just about legacy pensions but about the people brought into the pensions fold since 2012 by auto enrolment. “Many may have already changed jobs since they auto-enrolled and given that they may have numerous jobs during their working life, keeping track of potentially numerous pensions is essential. Dashboard is as much about the younger generations, those who are newly enrolled or who will take out pensions in the future.”
Professional Paraplanner’s publisher, Research in Finance (RiF), is a leading research company in the financial services sector. On occasion our readers...
This week sees the launch of The Paraplanner Club, a new initiative devised by Siân Davies Cole and Chloe Phillips, a mentoring...
Professional Paraplanner has teamed up with Brand Financial Training to answer your questions around the exams scheduled for 2021....