People tracing lost pension pots soar to four-year high
Almost 12,000 people per month are trying to trace lost pension pots in 2013/14 through the Pension Tracing Service (PTS), according to research by law firm Pinsent Masons. This is a rise of 83% since 2010/11, and represents a four-year high.
It is estimated that there are currently over one million pensions, worth a total of £3 billion, abandoned in dormant accounts.
The PTS is now helping over 100,000 people a year trace lost pensions; it reports that one in six claim to have no idea where their pension is saved.
A report from the Department of Work and Pensions in July 2012 revealed that this number is expected to rise by 2050 to a staggering 50 million accounts, worth £757 billion.
The report points to the combination of auto-enrolment and a very mobile jobs market; as a consequence, it says people will save into a workplace pension scheme for only a short period before changing jobs, resulting in a rising number of dormant pension pots.
"The days when people worked for the same company all their lives are long gone and new pension legislation is needed to reflect the UK's increasingly mobile workforce," says Carolyn Saunders, London head of pensions at Pinsent Masons.
"People now hold several different jobs with different employers during their working lifetime."
Saunders believes, however, that the rise in PTS requests is good news and demonstrates there is an increased awareness of pension issues.
"With a record number of people facing inadequate retirement income, the need to keep track of your pension is greater than ever," she says.
That need is highlight by research from retirement specialist LV=, which finds that the average annual income for people working in the UK drops by two thirds upon leaving the workplace. Average retirement income in the UK is almost 24% less than the minimum wage.
"It's clear that today's retirees leave work with far more financial commitments to contend with than previous generations, meaning their money has to go further for longer," says Richard Rowney, life and pensions managing director of LV=.
'Pot follows member' legislation due next year will aim to address the issue of lost pensions. The new rules mean workers with pension pots of £10,000 or less will have their pensions moved automatically to the new employer when they change jobs.
"The introduction of auto enrolment will go some way toward addressing the pension crisis facing the UK, but until 'pot follows members' legislation comes into force in 2015 it will probably also lead to a further rise in PTS requests," says Saunders.
This article was written for our sister website Money Observer
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.