UK savers have got £31.1 billion in lost pensions, spread across 3.3 million individual accounts. That’s nearly £9,500 each. Not much of a retirement on its own, but still.
Where did this money come from? From auto-enrolment, from people moving jobs more often than they used to, and from poor financial education.
According to the Pensions Policy Institute, the amount in dormant funds just keeps rising.
People have forgotten they were paying into a pension, or quite possibly thought they were paying into the state pension they will get anyway.
How hard are the pension funds – huge City institutions – working to re-unite their customers with that £31 billion?
If your guess is that it isn’t exactly a top priority, you’re right.
Aviva has a “Find and Combine” tracing service, so it’s trying to do the right thing.
It says it has helped track down nearly 36,000 pensions worth £426 million. Fair play to Aviva.
Others seems to take the view that they might as well just take the fees for looking after money people have forgotten about anyway.
In fairness to the funds, tracking these folk down isn’t that easy.
The problem is if you worked for Bill's Mechanics from 2010-2012, you would have been auto-enrolled in a pension. You left, moved house, Bill's got taken over/went bankrupt in COVID, the pension was moved to another provider and so on.
Trying to piece that back together is difficult.
We can argue about who is responsible for keeping up to date with these investments - the employee, the employer, the pension provider or the government.
But it's the last one who holds the keys when it comes to reuniting pension savers with lost assets. They have NI numbers matching to last known addresses.
The DWP offer a service where for £5 a time, they will forward a letter to a pension holder's last known address based on the NI number.
But why would a pension provider pay this money? Best case scenario it costs them a fiver, Worst case, they see the funds transferred somewhere else.
The DWP form is also a nightmare. You are only allowed to make seven enquiries per form, which is a headache if you’re trying to track down three million pensions.
Help may be at hand.
Chris Gawne is the founder of eurikah, which helps investors find lost pensions.
He says: “Auto-enrolment has turned us into a nation of accidental investors, yet millions of pension savers clearly haven’t been made aware that it’s their responsibility to track what’s happening to their retirement savings – especially when moving jobs.”
“A rudimentary pensions tracing services has been introduced, but this is fraught with limitations and often fails to locate missing pension pots.”
“Pension administrators could do more here as they can get help from the Department of Work and Pensions to track down investors based on their National Insurance number, but this currently comes at a cost so what is the incentive?”
So how about instead the government sweeps all the data into one statement, reuniting savers with these lost pensions. Even if this does cost £5 each time, the £16.5m spent would be quickly recovered.
Anyone on the full state pension is very close to hitting tax thresholds now so the government would recover income from tax revenue.
Those in genuine hardship at present may be benefitting from pension tax credits.
They may lose eligibility to these if reunited with assets - shifting a £31 billion liability from the public purse to the pension administrators. It should be cost neutral at worst for the pension holder.
The trickle-down effect - £31bn being spent -- would have a material impact on the economy.
Gawne adds: “Unclaimed pensions deprive those who contributed of the benefit, whilst also hitting the public purse with additional welfare payments being made to cover shortfalls and tax from income not being realised.”
A pensions dashboard is apparently in the making https://www.pensionsdashboardsprogramme.org.uk/ but it looks painfully slow and the fragmented nature of many holdings means that there are concerns it will be inconclusive.
The existing pensions tracing service is reliant on you having the right employer name (some companies operate under multiple names) and knowing who the pension is with. Feedback from those who have tried using it is that it doesn't work very well.
A government desperate for growth should get into this issue and get help from firms like eurikah.
