Two out of five adults know the whereabouts of all their private and workplace pensions, while the rest are either hazy on the details or are not saving for retirement at all, according to new research from pension provider Aegon.
The survey found that 16 per cent of adults are completely in the dark about where any of their pensions are held, while a further 20 per cent have kept track of only some of them. Among those surveyed, 24 per cent said they do not have any pensions of their own, although many may have forgotten about old retirement funds and could still be building up entitlement to a state pension, currently worth £12,550 a year at the full rate.
Aegon said the rise of automatic enrolment, which places workers into a new pension scheme every time they change job, means people are accumulating an increasing number of pots over their working lives, and many simply lose touch with them as time passes.
Why pension pots go missing
Job switching, auto enrolment with every new role, and people's tendency to lose pension paperwork or fail to update schemes with their current contact details are all contributing to a growing pile of orphaned pension pots, Aegon said.
Think-tank the Pensions Policy Institute has estimated that savers have lost track of 3.3 million pensions altogether, worth a combined £31.1billion.
Communication gap with providers
Aegon runs a service called Mylo, designed to help savers locate lost workplace pension pots, and said its survey highlights the challenge many people face in keeping track of their retirement savings.
The research also found that many people struggle to understand the communications they receive from their pension providers. While 72 per cent of pension savers said they open their annual pension statement and 69 per cent said they read it, only 55 per cent said it helps them understand whether they are saving enough for retirement.
Aegon found that 30 per cent of pension savers never check where their pension is invested, while 21 per cent check their pot at least once a month. The company surveyed 2,000 adults in mid-August, weighted to be representative of the UK population.
'You can't plan effectively' without tracking savings
Nick Roy, commercial director of workplace at Aegon, said: "You can't plan effectively for retirement if you've lost track of your pension savings."
"For many people, the challenge isn't a lack of interest in planning for the future, it's keeping on top of pension pots accumulated across different jobs and different stages of their working life," he said. "As people move between employers and build up multiple pension pots, it's easy to lose track of what you've already saved."
Inheritance tax rules add urgency
Tracing old pensions is set to matter even more from next April, when pensions will start to be included in estates for inheritance tax calculations. Executors and administrators of estates will need to identify and pass on to HM Revenue and Customs the details of whatever is left in funds held by someone who has died.
Even when no inheritance tax is ultimately due, a deceased person's finances will still need to be examined, and information will often have to be submitted to prove that to the taxman.
Tracking down lost pensions
The pensions industry itself has an incentive to help reunite people with lost pots, since providers face administration costs in maintaining records and trying to contact savers using out-of-date details, sometimes for very small sums. As a result, old employer schemes and pension firms may be more willing to help than savers expect.
Once lost pensions have been found, consolidating them into fewer accounts can cut fees and paperwork and open up new investment options, though savers are advised to check first, since merging pensions is not always advisable and can risk the loss of valuable benefits attached to older policies.
Anyone who tracks down old funds should register their current details with the provider and keep them updated whenever they move house in future. Savers are also advised to keep hold of old pension paperwork, which contains important reference numbers and valuations, and to securely store a list of relevant websites and log-in details for their family.
Pension dashboards, which are intended to let people view all their pension savings in one place, are still pending and are expected to become a useful search tool in future, but no launch date has yet been set for public access.
