National Pensions Tracing Day highlights ‘profound’ issue

28 October 2023

Nearly £27 billion is sitting in lost or forgotten pension pots, prompting calls from the pensions industry for the Government to deliver the long-awaited UK pensions dashboard.

National Pensions Tracing Day (29 October), was created by Punter Southall to encourage people to check whether they have savings they did not know about.

According to Punter Southall, there are an estimated 2.8 million lost or forgotten pension pots worth on average around £9,500 each, amounting to £26.6 billion collectively.

The high figures have led to calls for the dashboard timetable to be given a renewed focus.

Kate Smith, head of pensions at Aegon, said: “National Pensions Tracing Day is a vital initiative to help people find their lost or forgotten pension pots. We are calling on the UK Government to deliver the guidance needed by pension providers to help deliver the long-promised UK pension dashboard. The pension dashboard will enable people to see all their pensions online, securely, in one place. Once up and running, people should never again lose track of their old pensions.

“The £26.6 billion scandal of lost pensions must become a thing of the past, every penny saved counts, particularly as families struggle through the cost-of-living crisis.”

Pension schemes were due to start connecting to the pension dashboard digital architecture this year on a phased basis, but technical issues put this on hold. All schemes must now connect by 31 October 2026, however, guidance regarding connection dates has yet to be published and there is uncertainty about when pension dashboards will go ‘live’ and be accessible to the public.

Smith said that while the industry waits, it must also help workers get into the habit of taking their pension to their new employer’s workplace scheme as they move jobs.

She added: “It’s all too easy to undervalue or lose track of small pension pots, combining them into a workplace pension scheme not only makes them easier to manage, but also shines the light on how much has been saved.”

Hargreaves Lansdown has also called for greater awareness of the Pension Tracing Service, warning that pension savers risk missing out on “thousands of pounds” of pension income.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Most of us will have several jobs over the course of our working lives and auto-enrolment means we could have a pension in every one of them. As time passes, we may move house, contact details get lost and we lose track of a pension. This potentially has major implications for our retirement income. The pension may only be small but over time it will grow, and you could be missing out on thousands of pounds that could contribute towards your pension income.

“This could prove the difference between having to scrimp and save to get by in retirement or being a bit more comfortable.”

Research carried out by Hargreaves Lansdown showed that almost a quarter of people (23%) believe they have lost track of a pension, while nearly a fifth (18%) were unsure. A Freedom of Information request submitted by the firm showed that the Pension Tracing Service received 251,733 phone calls between July 2018 and August 2023 – just a fraction of the number of people estimated to have lost a pension pot.

“Tracking down a lost pension could have a transformative effect on your retirement so taking the time to think through what pensions you have and filling in any gaps could be an hour extremely well spent,” added Morrissey.

Nick Hall, Business Development Director, Wealth Wizards, commented that the impact of connecting people with their pension money, both for the individual and on retirement lifestyles in general in the UK, “could be profound”.

But, he added, it is just a part of the picture financial services should be helping to address.

“There are educational and practical imperatives here also, to ensure that once their pensions have been found, people are able to make the right decisions on how they address, manage and access those pensions.

“It is important that individuals know how pensions work for them, how they fit within their personal financial picture, and what action they can take depending on their individual circumstances. Should they freeze their newly found pension, could they contribute into it helping to build their retirement pot, or would consolidating the pension with others they hold be an option?

“While few may require full on financial advice, many will be looking for guidance from a trusted source to help them see the bigger picture and make an informed decision.

“Digital guidance processes are already being used effectively within the market to help people make the right choices. They provide a digital journey that educates and is personalised to the consumer’s financial circumstances, and which then offer options best suited to that individual.

“Resource efficient and cost effective for the provider, from a business perspective they have helped providers build and develop new revenue streams.

“The Pensions Dashboard will help open up this market even further. While it is not due to be implemented until 2026, there is the opportunity for providers to get ahead of the curve and have a system in place to provide a guidance/advice service that can deliver at scale.”

Looking forward, he added, as the Pensions Dashboard is re-uniting people with their pension money, “we can expect a scamming activity will increase too. More than ever, consumers will need trusted sources they can go to for guidance to help them make the right financial choices and stay safe from financial criminals.”

Professional Paraplanner