Make sure your pension savings don’t get left behind
The employment landscape has evolved significantly over the last few decades, and changing jobs multiple times before retirement is now very much the norm. Even if you have not had that many jobs, you may still have a number of different pensions to keep track of.
Nearly two thirds of UK savers have more than one pension, and changing work patterns mean that the number of people with multiple pensions will increase. People typically lose track of their pensions when changing jobs or moving home. The average person will have around 11 different jobs over their lifetime[1]. The Government predicts that there could be as many as 50 million dormant and lost pensions by 2050.
Multiple pensions
As a result, many people have multiple
pensions set up, as they have been automatically enrolled into a new pension
scheme each time they have started a new job. The scale of the UK’s lost
pensions was highlighted in the latest research carried out on behalf of the
Association of British Insurers (ABI)[2].
In the largest study yet on the subject, the Pensions Policy Institute (PPI) surveyed firms representing about 50% of the private defined contribution pensions market. From this, PPI found 800,000 lost pensions worth an estimated £9.7 billion. It estimates that, if scaled up to the whole market, there are collectively around 1.6 million pots worth £19.4 billion unclaimed – the equivalent of nearly £13,000 per pot.
Different employers
If you have accumulated a number of
pension pots over the years from different employers, consolidating them could
be appropriate. By bringing together all your different pension pots, it can
help give you a clearer picture of your financial position, enabling you to make
more informed decisions about your retirement savings.
Bringing together multiple pension pots could be a sensible move if you have a number of pension pots and want more control over your money or less hassle managing them. You may also be unhappy with the performance of a current provider, the choice of investments offered by them or the high fees.
Valuable benefits
However, a pension consolidation is not
always appropriate. It may not be sensible to consolidate your pensions if you
are a member of a defined benefit pension scheme. If you transfer out of this
type of pension, you may be giving up guaranteed benefits and potentially taking
on greater risk.
Also, if you have a pension that comes with valuable
benefits (for example, a pension that allows you to buy a higher income in the
future via a ‘Guaranteed Annuity Rate’) or your pension provider charges high
fees to transfer to another provider, pension consolidation may not be the right
option.
Source data:
[1] The Lost Pensions Survey includes
data from 12 large insurers, covering around half of the defined contribution
pensions market.
[2] The Association of British Insurers is the voice of the
UK’s world-leading insurance and long-term savings industry.
TRANSFERRING OUT OF A FINAL SALARY
SCHEME IS UNLIKELY TO BE IN THE BEST
INTERESTS OF MOST PEOPLE.
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.
PENSIONS ARE NOT NORMALLY ACCESSIBLE UNTIL AGE 55. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY 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.
THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.
ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
ACCESSING PENSION BENEFITS EARLY MAY IMPACT ON LEVELS OF RETIREMENT INCOME AND YOUR ENTITLEMENT TO CERTAIN MEANS TESTED BENEFITS AND IS NOT SUITABLE FOR EVERYONE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.