When you consider the ongoing cost of living crisis, to find that a staggering £26 billion worth of pension assets are not matched with their owner will astound many. This is a potentially vast retirement income lost due to something as simple as a changed address.
The Association of British Insurers (ABI) has been highly active in highlighting unclaimed pensions, both workplace and private pensions, and promoting pension tracking services. As a result, there are several ways to claim your full pension entitlement and increase your income in retirement.
How do people lose track of their pension pots?
While many people will have relatively few jobs in their working life, the average person changes their job 12 times in their lifetime. So, this is potentially 12 workplace pension arrangements, not to mention previous employers going out of business, changing names, and people moving house. Recent changes to workplace pension legislation mean that auto-enrolment could see many more people losing track of pensions in the future. This puts a little more perspective into the discussion about lost pensions. If your pension provider or old employer does not have the correct information, it will be nearly impossible for them to contact you.
The situation is slightly different for those with a personal pension scheme, such as a SIPP, where all payments are made directly into one plan. Unlike when you change employment pension schemes, it is simply a case of funds coming from different third parties but into the same pension arrangement.
Different types of pension plans
Before we look at ways to trace different pension schemes, we must appreciate the two options available. They are known as defined benefit (often referred to as final salary schemes) and defined contribution (often referred to as money purchase schemes).
Defined benefit and defined contribution
Payments from a defined benefit pension plan are guaranteed and directly related to your final salary and years of service. On the other hand, payments from a defined contribution pension scheme are dictated by the value of the underlying assets. So whether you go into drawdown or buy an annuity, you are at the beck and call of the markets.
While historically, many workplace pensions were defined benefit, this is not generally the case today. Consequently, an individual could have several defined benefit or defined contribution schemes active at any time. In addition, while defined contribution pensions are often merged into one plan, this is rare with defined benefits, which are not transferable. If you held 12 different employment roles in your working life before retirement, this could get complicated!
State Earnings-Related Pension Scheme (SERPS)
Many people who started employment before 2002 will be aware of SERPS, a government scheme to increase their state pension. National insurance contributions were invested on behalf of individuals to improve their basic state pension. However, due to the vast pension liabilities facing the UK government, this scheme was replaced in 2002 by the State Second Pension scheme. This is often referred to as the Additional State Pension Scheme.
Those contributing to the SERPS system were allowed to "contract out". This saw their national insurance contributions redirected into a personal pension scheme. The idea was simple; those contracting out believed they could achieve a greater return than under the original SERPS system. Unfortunately, despite taking financial advice, some people have lost track of their contracted-out personal pensions. However, all is not lost!
Tracing old pensions
If you are one of the 22% of people who have lost track of a pension or one in five people not confident of knowing where their pensions are, help is at hand. Whether you are looking for details of your old employer’s scheme, a personal pension provider or confirmation of your SERPS situation, there are several options.
Pension tracing service
Unfortunately, while the Internet has proved invaluable for those looking to find old pension pots, we have also seen many scams. While many financial companies will help you find an unclaimed pension, the UK government has set up its own pension tracing service. This free government service can be accessed at www.findpensioncontacts.service.gov.uk.
Three specific services are available when attempting to locate missing pensions through the government website.
Public sector pensions
When accessing the website, you will be asked whether you are looking for NHS, civil service, teacher or armed services pension arrangements. If you select this option, you will be directed to a page with several website links. These are split into different countries, England and Wales, Scotland and Northern Ireland and will lead you to the appropriate parties. Once you make contact, they should be able to trace any pension entitlement using your personal details.
When asked about NHS, civil service, teacher or armed service pension arrangements, you will be redirected to another area of the website if you answer no. Selecting workplace pensions allows you to find details about your former employer or old pension provider. This database holds details on literally thousands of different workplace pension schemes, and it has helped many people locate their pension savings.
One of the more popular pension options these days is a personal pension which is effectively carried from employer to employer throughout your working life. These schemes can accept various pension contributions from the member, employers or even the transfer of your SERPS entitlement. By entering the name of your personal pension provider, the database will present an array of appropriate contact details.
SERPS pension check
Currently, there is no online system to check the situation regarding your SERPS contributions. However, you can contact HMRC directly, providing your personal details and national insurance number. You should receive a response within 30 days clarifying whether you are entitled to an additional SERPS pension or whether you contracted out. If you have contracted out, HMRC can provide details of the pension provider that received your funds.
Additional information required
When contacting the relevant parties to reclaim your missing pension assets, you will be asked for information to confirm that you are the legal owner. Much of this information will be on old payslips and will include the likes of:
- Full name (previous names)
- Full address (previous addresses)
- Date of birth
- National insurance number
- Type of pension
- Retirement age
- Employee number
- Policy number
In the past, you will likely have received an annual update on your pension fund contributions, fund value and potential payments in the future. These summaries will provide a raft of information you can use to help trace missing assets. Of course, the more pension details you can provide, the easier it will be to find missing pension assets. However, policy numbers and other information may be limited in some cases.
Pension Protection Fund
The Pension Protection Fund is another valuable source of information concerning pension schemes. The pensions industry funds this service, which ensures that pension fund members are protected and receive their appropriate entitlement. If your previous employer's pension scheme is a member of the Pension Protection Fund, their details will be available on the website.
There may be occasions where you are not in receipt of the full name of your previous employer, or they have been taken over or changed name. The Companies House website maintains a vast database of inactive and active companies, with name changes, takeovers and new addresses. If you are struggling to find information about your previous employer, check out the Companies House website, which is free.
Approaching an independent financial adviser
If you are still struggling to find missing pension assets, approaching an FCA-regulated independent financial adviser may be worthwhile. While the process is sometimes complex and long-winded, they should be able to help you find details of your previous employer/pension fund provider. It is then simply a case of writing to the appropriate parties to confirm and reclaim your pension assets.
In theory, locating old pensions is relatively straightforward but may be more challenging in practice. This is why many people feel more comfortable approaching an independent financial adviser to ensure that no pension assets are left unclaimed.
Make sure you reclaim your lost pension assets
While there are many ways to securely store personal financial paperwork, whether a hard copy or an electronic copy, information can often go astray. Whether you have changed your name, changed your address, or moved abroad for a short time, losing track of pension assets is much more common than many assume.
Thankfully, there are numerous ways and means by which you can find lost pensions and begin the process of reclaiming your assets. Any additional source of income can make a huge difference in your retirement, making life just that little bit easier.