Nearly 1 in 4 lose track of pension pots. New research for Age UK shows 23% of UK adults have lost track of at least 1 pension, creating confusion and uncertainty over retirement saving plans
A shift in working cultures and confusion around retirement planning is resulting in a pension ‘black hole’, with almost a quarter (23%) of UK adults stating they have lost track of at least one pension scheme – according to a new online poll for Age UK.
The poll, commissioned to understand more about people’s attitudes and plans for retirement, reveals that nearly a third (30%) of UK adults would try to trace a pension if they realised they had lost track of it. However, people are unsure about how and where to start hunting these pensions down.
23% of younger workers (25-34) have already worked for 5-6 employers – matching the average total for those aged over 65.
Reasons behind the UK’s missing pensions
• Nearly half (47%) of people missing pensions are unclear how they lost track of them.
• 1 in 5 (20%) people missing pensions say they have lost their pension paperwork
• 10% blame the fact that they’ve moved jobs too many times to keep track of their pensions.
• Younger generations are more likely to have lost track of a pension, with 37% of those aged 18-44 already having experienced this.
Lost pensions: a symptom of the times
The trend for adults to have a variety of employers over a lifetime, often resulting in multiple workplace pensions, is one of the root causes of the emerging pension ‘black hole’.
Tellingly, the average person over 65 has worked for around 6 (5.6) employers in total, while a quarter (23%) of those aged 25-34 have already worked for a similar number – yet have more than approximately 35 years left before they are likely to retire. This indicates that the younger generation will almost certainly have a variety of pension pots as they get older.
With the UK’s financial situation remaining precarious, the findings revealed a mixture of scepticism and uncertainty about long-term financial planning:
• 12% of those surveyed said they don’t think that there is any point as ‘nothing is guaranteed’.
• 9% didn’t know how to start out planning for retirement.
• Worryingly, 24% of adults said that they were aware that they should be financially planning for their retirement, but currently can’t afford to.
Tracing a pension
Age UK’s research shows that there is much confusion and uncertainty about how to trace a pension:
• If they realised that they’d lost a pension, nearly a quarter (23%) of potential pension-hunters would ask previous employers for help.
• 15% would consult the government or tax office.
• 11% would look online for advice.
• 7% would turn to a friend or relative for help.
Commenting on the findings, Lucy Harmer, Head of Services at Age UK, said: ‘It’s really important we all set aside time to keep on top of our personal admin, such as organising paperwork and keeping details of any financial products safe and secure. This is especially crucial for pensions as it may be some years down the line until they need to be accessed.
‘With the number of jobs we have over a lifetime increasing, it’s likely that people will accumulate several small pension pots. In many cases these bring a less fruitful income in later life than one large pension pot.’
Lucy Harmer continued: ‘While some measures are being taken by the Government to account for smaller pension pots likely to be created under automatic enrolment, existing pots that we may already have are not being accounted for. This makes it more important than ever that we keep on top of what we have already accumulated.
‘We strongly advise people to seriously think about planning for retirement and the kind of lifestyle you want – it’s never too early. At Age UK we have a range of information and services available to help with pension preparations, including a pension planner, help and guidance, as well as information on the state pension.’
Tips from Age UK on how to find a lost pension
• Collect as much information about your previous employer as possible including names, the type of business it ran, previous addresses and scheme dates.
• Search for any paperwork that you may have received with the pension.
• Type of pension – try to remember if it was a workplace or personal pension.
• Call the Pension Tracing Service which can help to track down your lost pension on 0845 600 2537.
More information about planning for retirement
Age UK offers free, friendly, and impartial advice to people in later life, their friends, family and carers.
Browse the links to relevant topics on our website
www.ageuk.org.uk or call Age UK Advice free on 0800 169 6565 to find out more about retirement planning.
In addition, the Age UK Annuity Service, provided by Premier Retirement Services, enables people to shop around and compare annuity rates from leading providers. For more information call 0845 600 9269.
Call for clarity on pension changes
The Government must do more to explain how people will be affected by the shake-up of the state pension system, a committee of MPs has warned
The success of the simplified flat-rate state pension, which will come into effect in April 2016, hangs on the Government stamping out any confusion over the changes sooner rather than later, the Work and Pensions Committee said.
The new single-tier pension will affect about 40m people of working age and be worth around £144 a week in today’s money. It will run alongside the Government’s initiative to automatically enrol people into workplace pensions to encourage more to save for their retirement.
In its report, the committee argued that it is ‘vital’ the Government addresses how it will communicate the changes by the time the Pensions Bill comes before Parliament in early summer, including how the internet can be used to explain how people will be affected.
The report said: ‘It’s particularly important that groups of people who may lose out, or who believe that they may lose out, are given accurate information so that they can assess whether they need to take remedial action, which might include making additional National Insurance contributions.’
The committee warned that, although the system will be simpler in the long term, its roll out will undoubtedly hit a few teething troubles.
Ultimately, the reforms are intended to reduce people’s reliance on means-tested benefits and give them more confidence about the benefits of saving into a private pension scheme.
The report said there are already several ‘misconceptions’ about who stands to gain or lose from the changes and it is important that concerns are ‘allayed as far as possible by the provision of accurate and understandable information’. It agreed that those closest to retirement have the most immediate concerns.
The committee found that many people wrongly believed the reforms would mean everyone received a state pension of £144 per week because they did not yet understand the criteria for entitlement to the full amount. Others feared they may lose any higher state pension entitlement that they had built up.
Committee chairwoman Dame Anne Begg said: ‘It is vital that the Government decides on its high-level strategy for communicating the changes to the public by the time the finalised bill comes before Parliament in the summer.’ Copyright Press Association 2013
What the new State Pension reforms mean for you
On 14 January 2013 the Government published a White Paper setting out proposals for State Pension reform for people reaching State Pension age in the future.
But what does the proposed new single-tier State Pension really mean and how will if affect future pensioners?
The main changes announced in the White Paper are set out here, but they still need to be agreed by Parliament:
• A single-tier, flat-rate State Pension. This will replace the basic and additional pensions for people reaching State Pension age from 6 April 2016 onwards.
• An increase in State Pension age from 66 to 67 between April 2026 and April 2028 and provision for 5 yearly reviews of State Pension age.
Who wins and who loses with the new reforms?
Single-tier State Pension
Why is a flat-rate pension being introduced?
The existing system is complex, has high levels of means-testing and produces inequality, eg women tend to have lower State Pensions than men.
The reforms are intended to address these issues and the aim is to introduce a simpler, fairer system where people have a clearer idea about what the state will provide making it easier to plan their retirement savings.
The Government has said that the new pension will apply to people who reach State Pension age after the changes are introduced so will not affect people who are already pensioners.
The new single tier pension will affect people reaching State Pension age from 6 April 2016, as announced in the 2013 Budget.
Key features of the single-tier pension
When the single tier pension is fully introduced it will have the following features:
• The current basic and additional pensions will be replaced by a single pension worth around £144 a week in today’s prices.
• The full single-tier State Pension will be based on 35 years National Insurance (NI) contributions or credits.
• As with the current basic pension, the law will require this to be uprated annually in line with earnings, but the aim is to increase it in line the ‘triple lock’ that is the higher of earnings, prices, or 2.5% (again as with the current basic State Pension).
• To qualify for any State Pension, people would need a minimum number of contributions – the model in the White Paper is based on 10 years. If this is the minimum, then someone with less than 10 years would receive no pension, while someone with between 10 and 34 years’ contributions would receive a proportion of the pension.
• Contracting out will end. This will only affect people in defined benefit occupational schemes as it has already ended for people in defined contribution schemes.
• It will be an individual entitlement, so there will be no special rules for people who are married, bereaved or divorced.
• Pension Credit and other means-tested benefits will continue to provide a safety net, but the savings credit element of Pension Credit will be abolished.
• The proposals are intended to be cost neutral every year – meaning that spending on State Pensions will remain the same – so there will be winners and losers as compared to the current system.
The transitional period
Although in the future everyone with at least 35 years of contributions would receive £144 from their State Pension it will take some time to move to this position. During the transitional period some people will receive a State Pension which is higher than £144 a week and some people will receive less.
When the single-tier pension is introduced anyone who has already built up a NI record will have this translated into an amount described as a ‘foundation amount’.
State Pension already built up will be protected. If the ‘foundation amount’ is more than the level of the single-tier pension, any amount over £144 will be protected and paid in addition to the single-tier pension once an individual reaches reach State Pension age.
In some instances, people will have been contracted out of the additional State Pension and will have been paying lower NI contributions, while building up a private pension instead.
If this is the case, then those people will start to build up years of single-tier State Pension from 2016 to State Pension age.
However for some people the final State Pension will be less than £144 if, for example, they had been contracted out of the additional State Pension and paying lower NI contributions for many years.
Transitional help from means-tested support and inheritance
Currently Housing Benefit and Council Tax Benefit – which provide means-tested help with rent and council tax – are paid at higher rates to people aged 65.
This is linked to the level of savings credit. Savings credit will be abolished for people reaching State Pension age after the single tier is introduced.
However as a transitional measure, for the first 5 years, there will be additional support with rent and council tax for those who would have received higher support with these costs had savings credit still been in place.
Although the single-tier pension will be an individual entitlement there will be some provision for inheritance of protected payments and additional State Pension already built up.