3 practical reasons it’s so important to keep track of your pensions

three pink pig-shaped money boxes

How many pension pots do you have?

If you’ve worked for several employers, or you’ve ever started a pension for yourself, you could well have several pension funds with different companies or different providers. All this can make it easy to overlook or “lose” one of your pots.

Pensions Expert reports that there are an estimated 1.6 million pension pots that have been lost or forgotten, totalling an eye-watering £19.4 billion.

To raise awareness of this issue, the UK’s first National Pension Tracing Day will take place on 31 October.

With backing from insurers including Scottish Widows, Aegon, Legal & General and Standard Life, consumers are being urged to take advantage of the clocks going back to spend the extra hour tracking down old pensions.

Emma Byron, managing director of L&G Retirement Solutions, says: “We know the value that spending time on your retirement planning, even if it’s just an afternoon, can make once you reach retirement.

“We hope to see many people taking advantage of October 31 as an opportunity to start their search for their lost and forgotten pots.”

Read on for three reasons why it’s so important to track down your old pensions, and for some tips about how to go about finding old funds.

1. All your pensions will contribute to your retirement income

On average, people switch jobs 11 times and move eight times. According to the Department for Work and Pensions, by 2050 this could lead to as many as 50 million lost pensions.

Emma Byron, from L&G Retirement Solutions, says: “People change jobs and move house more frequently now than in the past and their lost and forgotten pots can make all the difference, particularly as we see such a significant number of people reaching retirement without adequate pension provision.”

When it comes to ensuring you can live the lifestyle you want in retirement, all your pension pots will have a part to play. Your retirement income is likely to come from a broad range of sources including:

  • All the various pensions you’ve paid into during your working life
  • The State Pension
  • Investment income, perhaps from ISAs or shares
  • Any employment income, perhaps from working part-time or on a consultancy basis
  • Other income, such as from buy-to-let property.

Keeping track of all your pensions is therefore vital, as each of them will contribute towards your retirement income. Even small pots that you only paid into for a few years can still be hugely valuable, thanks to tax relief and years of compound returns.

2. You need to keep the “death benefit nominations” up to date

The benefits held in a pension scheme do not usually form part of your estate. So, your will does not have any impact on how your pensions benefits are distributed when you die.

Instead, a pension scheme administrator will require you to complete a “death benefit nomination form”. While the decision how benefits are paid normally rests with the trustee of the pension scheme, the nomination you provide normally guides their decision.

It follows that, if you have multiple pension schemes, you need to ensure your nominations are always up to date.

For example, if you have lost track of pensions and not updated your nominations, the benefits could be paid to the “wrong” person in the event of your death.

3. You could be paying high fees or getting poor performance

If you have lots of different pension pots, then it’s possible that some may be charging higher management fees. The performance of the various funds might also be variable.

If you don’t monitor your old pensions, or you lose track of them altogether, they might not be working as hard for your future as they could.

Robert Cochran, retirement expert at Scottish Widows, says: “Our research tells us that while savers already have the option of combining their pensions, 1 in 10 have no idea how to do this, while 12% say it’s just too much hassle. As a result, 44% say they have never bothered to track down savings from a previous employer.”

Tracking down and consolidating your old pensions into one fund can offer some benefits:

  • It can make it easier to keep track of your savings, as you are only monitoring one fund rather than many
  • It can result in lower fees. Each pension provider charges management fees when handling your pension and so, if you have multiple funds, then you could be paying more fees than you need to. Lower fees can boost the value of your fund and help you to reach your desired level of saving sooner
  • You could access a greater variation of investments, which align better with your goals and tolerance for risk. For example, your old pensions may be invested in funds that offer either too much or too little risk.

While there are benefits of consolidating old pensions, there are also some factors to consider. For example, your existing funds may be performing very well and so you might not want to miss out on these returns.

Consolidating may also result in you missing out on certain benefits from your other pension schemes. Older pension schemes may allow early access, guaranteed annuity rates, or the ability to take more than 25% as a tax-free lump sum. You may not want to give up these valuable benefits.

Always speak to an expert before consolidating pension funds to ensure it’s the right thing for you.

How to find old pensions

If you’ve changed employers or contributed to multiple pensions, it’s easy to lose track of a fund. This is especially true as, over time, pension schemes close, merge or are renamed.

Most pension schemes must send you a statement each year. So, a good starting point is to look for old paperwork which might have the name of your employer or pension scheme.

If you know which provider your pension was with, your first step is to contact them. Similarly, if you want to trace a workplace pension, your first point of contact should be the employer.

If you’re still struggling to make progress, you can contact the Pension Tracing Service. This free government service searches a database of more than 200,000 workplace and personal pension schemes to try to find the contact details you need.

The Pension Tracing Service on the government website provides more information.

Get in touch

If you have multiple pension schemes and you want to explore the right options for you, please get in touch. Email or call 01454 416 653.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

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