£26.6 billion in lost pension pots highlights value of retirement strategies

There is an astonishing £26.6 billion in lost and unclaimed UK pension pots, according to recent figures. At a time when many are people are facing working longer before retiring or having to deal with a pension shortfall, this is a striking number. Planning for retirement in advance is vital, with many people neglecting to make suitable arrangements until it is too late.

Accountants have a key role to play in helping people put the right retirement strategies into place. In this blog we look at how to find lost pensions, consolidate pots and put tax-efficient plans into action.

Lost and unclaimed

One in four people have lost track of at least one pension in the UK, with almost three million pension pots unclaimed. The estimated combined value of these unclaimed pensions is £26.6 billion. The average value of each pension pot is £9,500, which increases to £16,004 for those aged between 55 and 75.

One of the major reasons for these unclaimed pots is the change in modern working lives, with few people now working for 30 years with the same employer before retiring. The average number of jobs a person will have over their lifetime is now 11 and a pension could have been started in each of these.

However, only 4% of people tell pension providers when they change address and the average number of times a person will change address is eight.

The advent of auto enrolment will push the numbers of unclaimed pensions higher still.

Track and trace

These pots are safe with the provider, usually invested in the default fund and still growing. But saver has lost contact with the provider.

Tracking down these lost pension pots is a matter of going through past employers and finding out who the provider for the pension scheme is. Contacting the employer directly is easiest but where that is not possible getting in touch with former colleagues is recommended.

A government tracing service is available on GOV.UK while the Association of British Insurers (ABI) can also help. There are also private tracing services, although these cost money.

Those attempting to find lost pensions should be aware that it is an area that has been targeted by scammers in the past and cold calling is banned.

Pension dashboards

One development that aims to help clarify people’s pension situations are pensions dashboards. These are a digital service that allow people to keep track of all their pension savings. The roll-out of dashboards is currently scheduled to happen before October 2026.

Consolidating pots

The increase in people with multiple employers over their lives means that now over half of pension savers have two or more pension pots. A third of these savers want all their pension pots in one place but many people don’t know how to combine their pensions.

There are several reasons for consolidating pension pots. Keep pensions together makes keeping track of retirement savings easier while fewer providers will lower the charges payable for managing funds.

Consolidating pensions also gives access to different investment options and funds while different providers offer access to different feature that may make retirement planning easier.

Consolidating pensions is another area that has been targeted by scammers so those thinking of consolidating must be wary.

Complex system

The UK’s pension system remains complex to many of those saving within it. Developments in recent years have seen substantial changes to the rules for accessing money purchase pensions and the treatment of funds remaining on death. These changes have increased the attractiveness of including pension savings in estate planning by individuals.

Accountants have a vital role to play in helping their clients understand the options available.

Mercia’s Pensions Savings – The Tax Issues course examines the tax rules and any developments involved in providing for and accessing a pension.  

Planning for retirement is more important than ever, so make sure you’re equipped to help clients generate the right strategy for the end of their working lives.