New research suggests the amount sitting in lost pension pots could be as high as £20bn
There has been much discussion lately around the significant scale and impact of lost pensions.
Pension freedoms have opened up the market to savers, providing them with more choice than ever before. But this has made it all too easy for some to lose track of their arrangements.
Lack of clarity between various organisations and reports around what exactly is meant by “lost” have led to a wide range of estimates as to the amount that could be sitting in such pots. This has made it difficult to accurately determine just how many misplaced schemes there are.
What we do know is that nearly two thirds of UK adults have multiple pension pots, and as work patterns continue to evolve (the average person has around 11 jobs over their lifetime) the number of people with numerous arrangements is likely to rise somewhat.
Combined with the increased frequency with which younger generations (in particular renters) move house and the introduction of automatic enrolment, which has brought many unengaged individuals into pension saving, the problem is only set to get worse. Among those with multiple pensions today, 21 per cent (more than 6.6 million people) are aware of having at least one lost pot, 17 per cent have lost track of two pots and another 6 per cent have lost track of three or more pots.
These numbers are actually likely to be a lot higher as they only take into consideration pots individuals are aware of. Our Lost Pensions Survey suggests around 6 per cent of uncrystallised pots are held by customers considered lost – with as much as £20bn potentially sitting within them.
Based on current trends, the Department for Work and Pensions predicts there could be as many as 50 million dormant and lost pension pots by 2050 if nothing is done to improve matters.
The Pension Tracing Service’s aim is to reunite consumers with their pension pots when contact with the provider has been lost.
The number of tracing requests received by the PTS has increased by more than 430 per cent over the last decade.
In 2015/16 alone, the service dealt with 169,000 requests.
These figures demonstrate there is an awareness from consumers as to the possibility of lost pension pots and a desire to trace them.
This is further supported by the recent petition against the abolition of the pensions dashboard, attracting almost 200,000 signatures. This level of support and engagement will hopefully translate to people being more inclined to take a proactive role in managing retirement, and the pensions dashboard being used effectively.
If well-designed and implemented, the dashboard has the potential to reduce the prevalence of lost pensions in the future and enable those who have already lost track of pots to find them.
That in itself would have a hugely positive impact on trust in pensions and help to raise the amount of money people have saved for their retirement.
Chris Curry is director of the Pensions Policy Institute