Losing track of pension contributions can cost you dearly, but it’s not always easy to trace your savings
There’s a lot to think about when you move home, from finding the kettle to redirecting the mail. Yet while most of us manage to tell our bank and GP our new address, only one in 25 remember to let our pension provider know.
This means there is up to £19.4 billion1 lying unclaimed in pension pots in the UK, according to the Association of British Insurers. That adds up to an average value of £13,000 and around 1.6 million people who are missing out on savings that could help fund a more colourful retirement.
Tracking down lost pension pots is not always straightforward, but two new services from Legal & General are set to change things.
“We want to make life simpler for the millions of people who need help locating lost and forgotten pots, without them having to have their old pension statements to hand,” says Emma Byron, managing director of Legal & General Retirement Solutions. “People change jobs and move home more frequently than in the past, but the options for people looking to trace their pension pots have not kept pace.”
Legal & General’s research shows over half (53 per cent) of 45 to 65 year olds have more than one pension pot. It’s not surprising; beyond house moves, there’s frequent job changes – government figures show the average person has 11 jobs in their
working life2 – or lost paperwork to complicate matters. Many of us have no idea where to begin and are daunted by the possible time and effort needed if we have a number of schemes to track down.
The government does offer a service to find lost pensions, but research undertaken by Legal & General found that, of those who have tried to locate their lost pension through the government’s Pension Tracing Service, approximately a third (32 per cent) didn’t have the right details and 16 per cent found it too complicated3.
“Many people simply never try, or give up in frustration, so there is an urgent need for a simple, straightforward tracing service. It’s hard enough financing your retirement without missing out on money you’ve already saved. We want to reduce the complexities of retirement,” says Byron.
The Legal & General service requires the absolute minimum detail on your pensions and past employment, just where you worked and when. Once registered, you’ll receive regular progress updates and details of any pensions traced will be shown in a personal, secure dashboard. You’ll be able to see the pensions’ current values and, where possible, whether there are any penalties, guarantees or valuable benefits you should be aware of.
If you want to bring your pension pots together in one place with Legal & General, also known as pension consolidation, there is no fee for the tracing service. The standalone tracing service costs £100, but this fee is refunded if you decide to consolidate within six months.
Consolidation is not right for everyone, for example, those with defined benefit pensions may lose valuable benefits by consolidating, or there may be an exit charge for moving your money. However, you might choose to consolidate to simplify the paperwork and make funds easier to manage, or potentially reduce fees and charges.
“Not everyone is ready to make that consolidation decision until they have a better understanding of all their pension savings, which is why we’ve created a ‘standalone’ tracing option for customers unsure of their next steps,” says Byron.
The main reason for consolidating, given by 39 per cent in research carried out by Legal & General, was to bring all pensions together with a preferred provider. For many people this makes it much easier to understand how your pension fund is doing and to manage the admin.
“If you are still saving, it gives you a clear view of the charges you are paying and means you can choose to bring a higher charging pension into one with lower charges,” says Byron. “The majority
(69 per cent) of 45 to 65 year olds we spoke to were unaware of the charges on their pensions. You can also clearly see what you have and how much it is worth,
to ensure you are on track for the retirement you want.
“You can start drawing on your pension from the age of 55 but most people carry on working, at least until their state pension age, and continue saving.
If you’re 55 or over, looking to bring your pots together and to start to receive a retirement income, consolidating means you can receive one payment. That makes it easier to keep track of your finances.”
Some of the decisions you have to make about your retirement can be complicated, but Legal & General is committed to demystifying the process, giving customers all the information they need to navigate between different options.
“At Legal & General, we understand that pensions can seem overwhelming. People now have control over their own retirement planning, which is great, and we would always advise they take proper advice where possible. We are continuing to lead on innovation with our tracing and consolidation services,” says Byron.
It’s never a pleasure to sort out paperwork. But, for about the time it takes to make a cup of tea, you could make a big difference to your retirement planning, which is surely time well spent.
3 Opinium Research ran a series of online interviews among a nationally representative panel of 2,008 UK non-retired adults aged 45-65 from the 6th-12th October 2020
You can find out more about tracing and consolidating pension pots with Legal & General at legalandgeneral.com/retirement/pension-consolidation/
Impartial retirement guidance is available from the government’s Pension Wise service www.pensionwise.gov.uk