Pension savers are being urged to trace their savings as thousands could be entitled to an average boost of £23,125.
New research from Gretel, a free money-tracing service, estimates 28 million people in the UK have a lost or dormant account. Collectively, around £65billion is sitting unclaimed.
A combination of people switching jobs and automatic enrolment into workplace pensions is believed to be behind the increasing number of lost pots.
Rachel Vahey, head of public policy at AJ Bell, said: “Automatic enrolment is one of the big public policy success stories of our time. Since 2012, over 11 million people have been automatically enrolled into pensions, creating many new pension savers.
“But it’s not without its flaws. People switch employers and then switch pensions, leaving their old ones behind, neglected and unloved. This has created a plethora of small pension pots which are easily forgotten.”
To locate a lost pension, people can use online tools such as Gretel or the Government’s Pension Tracing Service. These tools are free and easy to use, and people can run a search in minutes.
Duncan Stevens, CEO of Gretel, said: “Pensions remain one of the largest categories of lost assets with millions of people missing out on money that could significantly improve their financial security, especially in retirement.
“The current process of locating and reclaiming these funds is far too time-consuming, costly, and complicated, with many pension providers failing to make it easy for customers to track down what is rightfully theirs.”
However, he noted: “We make it easy for consumers to find and reclaim lost pensions and other dormant accounts – including savings, investments, life insurance, and Child Trust Funds – quickly, easily, and completely free of charge.”
Should I consolidate my pension?
Pension consolidation involves combining multiple pension pots into one account to simplify management and potentially reduce fees.
However, it’s important to check the terms of existing plans, as consolidating could mean losing valuable benefits or guarantees.
For those who decide to consolidate, there are different rules depending on the types of pensions you have. Ms Vahey explained that in ‘defined contribution’ pension plans, where you accumulate a pot of money accessible from age 55, the process should be relatively straightforward. She also noted that the minimum age for accessing pensions will increase to 57 in 2028.
Those with a ‘defined benefit’ pension valued at £30,000 or more must seek regulated financial advice before transferring.
Ms Vahey said: “Where defined contribution savers build up a pot of money, defined benefit schemes provide an income for life from a set date, usually based on your salary and the number of years you have been a member of the scheme. Lots of providers will only accept a transfer from your defined benefit scheme where the adviser has recommended you do this.
“You’ll just need to choose a provider with whom you want to consolidate your pensions and get the details of the pension or pensions you want to transfer over. Once you’ve given the relevant details to your new provider, they should do all the legwork for you.”
Ms Vahey added: “Before transferring any old pensions, you should check there aren’t any valuable benefits attached which you may lose or exit charges that will be applied. Your provider should be able to tell you if this is the case.
“You will then need to choose where to invest your pension. When doing this, make sure you are comfortable with the risks you are taking, have a diversified selection of investments and, crucially, keep your costs as low as possible.”
