Finding a lost pension
There is an estimated £19.4bn in unclaimed pensions cross 1.6 million pots; that’s a lot of lost money!
You might think it is difficult to lose track of something as important as your pension, but because of the way the system currently works, it’s easier than you might imagine.
How can you lose track?
At the moment every time you change job, you will be offered a new workplace pension. The rules do not allow for your pension pot automatically to follow you from job to job. It is possible to transfer your pension to your new employer, but – as we will explore – this is not always straight forward or the right thing to do.
Moving house is another reason we lose track of where our pensions are. The average person changes address eight times in their lives and while updating your bank and utility providers is obvious, informing your personal pension provider or old employer may get forgotten.
Why does it matter?
Your pension is your money. If you lose track of your pot it is possible that it will become what is known as a ‘dormant asset’ and no longer be available to you or loved ones. Keeping a close eye on your savings and investments means you will not fall foul of tax rules, and it makes it much easier to plan your estate and be sure you can enjoy the retirement that you deserve.
Can anyone help me find my pension?
As part of the Pension Act 2021, the UK government recently agreed to set up a Pensions Dashboard which will help you keep track of where your retirement savings are in one place, although this is not expected until at least 2023. In the meantime, there are other ways to find pots that might have got lost along the way.
Before you start, you need to get as much information as possible together. Try to find old statements and contracts which may help organisations in tracing your pension.
The government has a pension tracing service which can help you by post and online. While this is free it is a limited service and still requires you to reach out to pension providers yourself. For more information use this link.
You can also use the government’s Unclaimed Assets register. This is particularly helpful if you are trying to find savings and investments as well as pensions that you have misplaced. It costs £25 and more information can be found here.
Alternatively, Raindrop has created a pension finding service which will easily help you trace and combine lost pots. All you need is the name of the pension provider and Raindrop will take care of the rest! For more information click here.
Considering combining your pots?
If you have several pension pots spread across different employers and providers, it might make sense to put them all in one place. However, that is not always the case and there are costs and risks to consider.
First let’s look at the benefits. As we have discussed, having multiple pots makes it hard to keep track of your savings. Combining them in one place keeps life simple.
You might be paying higher charges to some of your pension providers. Moving your funds into one place can save on unnecessary fees.
By combining your pensions, you might get access to a wider choice of investment options.
Now let’s consider the disadvantages.
First, you may have to pay an exit charge to move out of a personal pension and these can have a notable impact on your final pot.
Second, some pensions may have a guaranteed annuity rate attached to them. This means that when you retire, your final pot will provide a certain income until you die. If you transfer out of that pension, you could be giving up a valuable benefit.
Third, small pots have additional benefits. If your combined pots are worth more than £10,000 and you start to take money from it, you will only be allowed to save £4,000 a year into a pension rather than £40,000. This is called the money purchase annual allowance. By keeping your smaller pots separate and under £10,000 each, you will still be able to save £40,000 a year and withdraw your taxable income.
A similar situation applies to the total amount you can save into a pension over your lifetime. The current lifetime allowance is £1,073,100. If you pay in more than this, you could trigger a large tax bill.
If you think you have lost track of a pension pot, then act now. The sooner you are back on top of your investment the greater the chance they will work more effectively for you.
What to do if you have lost your pension
• Contact your old employers and ask for a pension statement
• Contact your personal pension providers and ask for a statement
• Use the pension tracing service: https://www.gov.uk/find-pension-contact-details
• Consider paying for the unclaimed assets register: https://www.uar.co.uk/
• Use Raindrop’s find and combine pensions service by clicking here.