Britons with more than one workplace or personal pension have been issued a stark financial warning, as new research reveals a widespread risk of people losing track of their hard-earned retirement savings.
Data shows that a significant 24% of people have accumulated three or more separate pension funds. Alarmingly, 4% of individuals admit they are unsure how many pensions they hold or even where the accounts are located, raising fears of funds being forgotten entirely.
The Scale of the 'Lost Pension' Problem
Helen Morrissey, head of retirement analysis at investment platform Hargreaves Lansdown, urged people to make pension organisation a key part of any New Year's financial health check. "Many of us are juggling multiple retirement pots and there's a real risk we could lose track of one or more and leave ourselves worse off in retirement," she cautioned.
Morrissey explained that losing a pension is easily done, particularly when people move house and fail to update their contact details with old pension providers. This simple oversight can sever the link to a pension from a previous employer.
The scale of the issue is substantial. Research from the Pensions Policy Institute (PPI) indicates there are over 3.3 million lost pension pots in the UK system. Hargreaves Lansdown's own survey found 32% of people have two pensions, while one in four (25%) have three or more.
How to Find and Consolidate Lost Pensions
For those who suspect they may have lost a pension, there is a clear first step. "You can contact the government's Pension Tracing helpline," advised Morrissey. "If you have the name of either the pension provider or employer, they can give you contact details so you can try and track it down."
Once all pensions are located, consolidation could be a sensible next move. Morrissey highlighted a key behavioural benefit: "Having an overarching view of what you have can make a big difference to your retirement planning, because people tend to view one larger pot in a different way to several smaller ones, which they might be tempted to take as cash and spend."
The financial upside can be significant. Calculations using Hargreaves Lansdown's pension calculator illustrate the point. Someone aged 55 with a £60,000 pension could grow it to around £125,000 by age 67. However, if they discovered and consolidated a lost pension worth the average of £14,000 (based on PPI data for the 55-75 age group), their total pot could reach approximately £144,000 by 67.
Essential Cautions Before You Consolidate
While consolidation has advantages, experts warn against rushing in without checks. It is crucial to ensure you are not exposing yourself to costly exit fees or forfeiting valuable benefits like guaranteed annuity rates.
Morrissey issued a specific warning: "It also seldom makes sense to transfer a final salary pension." These defined benefit schemes often contain valuable guarantees that are difficult to replicate elsewhere.
Taking the time to track down and review all pension holdings can therefore pay substantial dividends, providing greater clarity, control, and potentially a much more comfortable retirement.
