Pension warning as three million 'orphaned' accounts have around £10k in unclaimed

Million of cash-strapped workers have lost pension pots worth a staggering £26.6bn, figures show.

That’s an average of £9,500 going unclaimed in three million ‘orphaned’ accounts.

Many people will be due a significant amount more – which could make the difference between financial security in retirement or penury, experts warn.

The situation is set to worsen in coming years as many of the 10m employees recently auto enrolled onto their workplace pensions lose track of their savings.

And disruption to lifestyles caused by the Coronavirus pandemic exacerbated the problem.

Since 2018, the value of lost pension pots in the UK has risen by 37% to reach a total of £26.6bn, an investigation carried out by the Pensions Policy Institute shows.

And 2.8m pots are now considered lost, an increase of 75% over the last four years.

Problems usually arise because people forget about pots built up in previous jobs, or they change their name or move house without telling their pension provider.

The industry spends millions of pounds every year on measures to help identify, track down, verify and reconnect people with their lost pension savings.

But only one in 25 people instinctively think to tell their pension provider that they have moved home compared to the 89 per cent who inform their GP or dentist.

Charlotte Ransom, founder of wealth managers Netwealth, said: “It’s understandable that in the current cost-of-living crisis, there is a growing fear among investors that their savings won’t go far enough in later life, especially with average lifetimes extending, requiring more substantial retirement savings.

“Now more than ever, it is vital that consumers track down any stranded pensions that they have worked hard to earn.They need to act to recover them sooner rather than later to regain control over these important pools of value.”

Sarah Layden, direct wealth director at Aviva, said: “It’s not surprising people lose track of their pensions. Some policies date back decades, to the start of our working lives. The issue however has accelerated since 2012 and the introduction of automatic enrolment.

“This system has positively transformed pension participation in the UK, adding more than ten million people to our saving population. But with more savers comes the greater chance of pensions getting lost.”

Experts warn that tracking down a lost pension can have a transformative effect on a pensioner’s budget and be the difference between scrimping and saving or having a bit more comfort.

This coming Sunday’s National Pension Tracing Day (Oct 29^th) aims to raise awareness of the importance of finding the money.

Savers should start by sitting down and making a list of all their employers and then checking to see if there is pension paperwork from that period.

If not, then getting in contact with the government’s Pension Tracing Service can help find it. All that is needed is an employer’s name or the name of the pension provider. The tracing service cannot say if there is a lost pension but will give contact details for the company.

Pension experts have blasted yet another delay to the setting up of a national online ‘Pensions Dashboard’ which would keep track of private pensions.

This was supposed to be up and running this year with pension providers joining in three waves between August 2023 and September 2024.

However, in March, ministers announced that the earliest the scheme is likely to be introduced is 2026.

Rocio Concha, director of policy at campaign group Which?, said: “Seven years have passed since the Government first made a commitment to introducing a dashboard.

“With billions of pounds lost or dormant in unlocated pensions, the need for dashboards is stronger than ever.”

Paul Holland, whose company Beyond Encryption specialises in online security for pension companies, said: “It’s clear this is a huge issue that isn’t going anywhere fast.

“Many of those who are approaching or who have reached retirement age will have pension schemes that were pre-digital. This has created significant barriers to successfully repatriating them which has seen the Government – once again – delay the Pensions Dashboard programme.

“Additional issues, such people having more than one National Insurance number, all add to the complexity of solving this problem and successfully relocating lost pension pots.

“As the economic climate continues to put pressure on household budgets, pension poverty is becoming increasingly prevalent. With consumers now having the capability to use their pension funds towards end-of-life care, as well as changes to the Dormant Asset Scheme allowing the inclusion of lost pension pots, reuniting ordinary people with these funds could not be of greater importance.”

The latest changes to the Dormant Asset Schemes means forgotten pension pots can now be claimed by the Government to be used for charitable purposes. However, all dormant pension pots can be claimed by consumers at any point no matter how long they have been dormant.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Most of us will have several jobs in our working life and auto-enrolment means we could have a pension in every one of them – it’s little wonder that we can lose track of them.

“Recent research conducted by Opinium shows that well over half of us (55%) have two or more pensions. If we don’t keep our contact details updated when we move jobs or houses then there’s every chance a pension could slip under the radar and leave you with potentially thousands of pounds less retirement income than you should.”

Hetty Hughes, of the Association of British Insurers, added: “Paying your pension some attention may feel like a daunting task but with the average forgotten pot totalling £9,500, it could really pay off.”