- Failure to keep tabs on old workplace pensions has led to billions of pounds worth of savings being misplaced or forgotten about, according to The Association of British Insurers (ABI).
- Pension pots can be ‘lost’ when an employee moves jobs and ends their membership of that particular workplace pension scheme.
- Pots can usually be transferred to their new workplace pension scheme, but in many cases workers neglect to do this and simply leave the money where it is.
- There is nothing wrong with doing this, as the pot is still in their name and they can still access it from the age of 55. This is sometimes known as a ‘frozen pension’. But problems can arise in the future, particularly if the person moves home without notifying the pension provider.
- Another problem of having inactive pension pots lying around is that even if the holder knows they exist they may be languishing in underperforming schemes.
- This can result in the holder missing out on thousands of pounds worth of potential growth over time.
- Once pensions have been tracked down it is often (though not always) a good idea to consolidate them into a single pot. There are exceptions to this, for example where one pension has special benefits that would be lost on transfer (such as a guaranteed annuity rate).
Workplace pensions remain a mystery to many
- The problem of pensions being misplaced or forgotten about is expected to worsen in the wake of auto-enrolment.
- Since this was introduced in 2012, more UK workers are enrolling in pension schemes than ever before.
- 47 per cent of employees admitted to not knowing how auto-enrolment works, while 1 in 7 confessed that they didn’t even know what it means. In addition, a third of workers did not know how much their paid into their pension each month.
- Recent increases to minimum workplace pension contributions should mean millions are better prepared for retirement than they would otherwise be. However, it remains up to individuals to educate themselves about where their money is being invested and how they can keep track of it.
- There are people that can help you understand pensions, such as The Pensions Advisory Service who can offer you guidance and cover the pension basics. Or if you want to talk about how your money is invested you should speak with an independent financial adviser who is regulated by the FCA.
