Many UK employees are in danger of losing track of billions of pounds in pensions, with startling new research uncovering that one in four workers (25%) have misplaced at least one pension pot.
The introduction of automatic enrollment into workplace pensions aimed to encourage retirement savings, as eligible employees are automatically enrolled in pension schemes by their employers for each job they hold.
However, a staggering nine out of ten individuals (91%) have held multiple jobs over the course of their careers, with the average number of jobs for UK employees standing at five.
Surprisingly, eight out of ten workers (80%) have failed to consolidate their pension pots, resulting in the accumulation of multiple pension accounts.
 |
Get our essential weekday HR news and updates.
|
Do you know how to combine pension pots?
The research, which was commissioned by the workplace pension and savings fintech company, Cushon, coincides with the government’s launch of a consultation on the proliferation of deferred small pension pots. The study also found that a third of employees (33%) are unsure about how to combine their pension pots, and nearly a quarter (23%) are unaware that consolidating their pots into a single account is even an option.
The problem of losing track of pensions becomes more pronounced with the increase in the number of pension accounts individuals possess. The challenge of keeping track of each pot and updating address details on each account only adds to the complexity. Regrettably, this issue is growing and must be addressed urgently.
According to separate research conducted by The Pensions Policy Institute (PPI) in October 2022, a staggering 2.8 million pension pots, totalling £26.6 billion, are currently classified as lost. Greater awareness and knowledge about the option to transfer pots could substantially reduce these figures.
The introduction of a pensions dashboard, intended to present individuals with a consolidated view of their various pension accounts, was expected to help resolve this issue.
However, persistent delays in its creation have hindered its ability to address the lack of understanding surrounding pension consolidation. To bridge this gap, it is crucial for the pension industry to demonstrate to savers that combining their pots is both feasible and efficient. Simplifying the transfer process is the key to achieving this goal.
Cushon has proposed two essential measures to simplify the transfer process and alleviate the burden on pension savers:
- Increasing digitisation through regulatory mandates: Outdated legacy systems and paper-based documents still dominate the pension industry. Embracing innovative technologies, such as mobile phone apps, will significantly expedite the transfer process for members and enhance transparency by displaying the total value of their pension pots, motivating them to consolidate their accounts. The government should play an active role in compelling providers to embrace digitisation and make the transfer process smoother for pension holders.
- Automatic transfers during job changes: Currently, when employers switch pension providers, the existing pension pot often remains with the previous provider, complicating the consolidation process. The government should intervene and allow for automatic transfers in cases where there is a change in pension providers, ensuring a seamless transfer without any action required from pension holders.
What needs to change?
Steve Watson, Director of Policy and Research at Cushon, emphasised that while the pensions dashboard is a step in the right direction, it is not the complete solution. He stressed that people desire not only a consolidated view of their pensions but also a straightforward process to combine them.
The prevalence of manual processes in an era of digitisation seems perplexing, and Watson emphasised the importance of making the transfer process more accessible through digitisation to eliminate the issue of multiple pension pots and the associated problem of losing track of them.
In conclusion, the issue of lost pensions and unclaimed funds affects individuals across the board and demands urgent attention from the pension industry and the government alike. Measures to simplify pension consolidation must be implemented promptly to safeguard the retirement savings of millions of hardworking UK employees.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
- Amelia Brand
- Amelia Brand
- Amelia Brand
- Amelia Brand
