MILLIONS of pounds in dormant and lost pension accounts are up for grabs as more people attempt to track down savings pots accrued over their working lives.
The Pension Tracing Service has been forced to triple its staff following a surge in demand over the past few months from savers hoping to give their finances a boost by locating old policies.
News that the service is ramping up its resources comes ahead of a radical pension overhaul in April that is expected to further drive up the number of people hunting for lost and dormant pots. Savers have around £400 million in pension accounts worth less than £2,000 and which are no longer paid into, the Institute for Fiscal Studies estimates.
With the average employee going through 11 different jobs during their working lives, according to government figures, most lost or dormant pots are those left behind when changing job.
The number of small pots has risen since the 2012 launch of automatic enrolment, under which some 10 million people will be paying into workplace pensions for the first time.
The government has forecast that within five years around 50 million workplace pension pots will lie dormant, including 33 million worth less than £10,000.
Jill Scott, of the Pension Tracing Service, said: “While it may sound strange, losing track of a pension is easily done, as people tend to move around the jobs market far more frequently than might have been the case in the past. Helping people to find their hard-earned money means they can look forward to retirement in a much better position.”
It can be surprisingly easy to lose track of pensions, said Iain Wishart, owner of Wishart Wealth Management in Edinburgh.
“A retired sea captain client of mine thought he had lost a company pension as the shipping firm he worked for had gone bust. It transpired that the pension entitlement he had was ‘bought out’ using a pension plan via Prudential. There was around £20,000 in there, so he was delighted as he had written it off.”
A series of name changes, takeovers and mergers in the insurance industry over the past 20 years has made it harder for savers to know who manages their pension.
“I have a life insurance that was originally with Allied Dunbar, then Zurich, then Resolution Life then Windsor and I think it’s now Phoenix life – all for the same policy,” said Wishart.
Locating lost or dormant pensions is straightforward, provided the official services are used. Some private tracing services specialise in finding lost pensions and investments for people, but for an often hefty fee.
The free Pension Tracing Service can be used at www.gov.uk/find-lost-pension or contacted on 0845 6002 537.
The key to finding all the pension pots to which you’re entitled is to collect as much information as possible about the various schemes you’ve joined. At the very least the Pension Tracing Service needs the name of the company or pension scheme you want to track down. Additional details such as the dates of employment, the type of business and where it was based will increase your chances of being reunited with your savings.
If it’s a personal pension you’ll need the name and address of the pension scheme and the financial company (such as your bank or an insurer) from which you bought the scheme.
“In our experience with a minimal amount of known information, pensions can eventually be found,” said Paul Lothian, director at Verus Financial Planning in Dundee.
“It is important to always have a reasonable awareness of one’s accrued pension benefits. I frequently meet prospective clients who have little notion of what they have in the way of existing retirement savings.”
The benefits of finding lost pension pots can be maximised by reviewing and consolidating them. Pensions taken out more than 15 years ago will typically have charges far higher than those on newer policies and they will have eaten significantly into investment returns over time.
Some pension pots may also be in underperforming investments that need to be ditched in favour of more suitable and effective options.
“For some people it will be appropriate to consolidate multiple benefits into a single arrangement,” said Lothian. “As well as being easier to keep tabs on, this allows a single, unified and appropriate investment strategy to be applied to the whole. Moreover, it may save costs and improve performance.”
Government plans for small pension pots to be automatically transferred on changing job should soon help prevent people from losing track of their savings.
It’s not just pension pots that can be tracked down for a financial shot in the arm. Some 1.6 million people fail to claim pension credit payments each year, government figures show. An easy way to find out if you’re missing out on state payments is to use the search function at www.turn2us.org.uk/ or call 0800 99 1234.
Meanwhile Standard Life revealed in late 2014 that more than 70,000 people have yet to claim windfalls they are due from its demutualisation in 2006. The Edinburgh-based insurance giant said the policyholders are entitled to £113m worth of shares or cash but have yet to claim it. Standard Life Shareholder Services can be contacted on 0845 113 0045.