These days many people have multiple pensions as a result of changing jobs, plus periods of self-employment.
They move on average 11-12 times in a lifetime.
This has consequences.
Standard advice states you should always join an employer-based scheme if one is available in order to benefit from their contributions.
And, as companies are required by law to enrol staff into a pension scheme (unless they specifically opt out) that can mean 11-12 different pots, before personal savings are added in.
Thus, some savers are building up a large number of small entities – and increasingly finding it hard to keep track of them.
So, what to do about it?
You could consolidate them. Having your retirement savings in one place can make life simpler. Consolidating your pensions will leave you with one large pot. A larger pot will multiply the effects of compound growth. However, don’t consolidate for the sake of it. There’s nothing wrong with having a number of schemes. Only transfer between schemes if there’s a benefit from doing so.
If you have older pensions, check too that you will not lose valuable guarantees by moving your pot. The most common is a “guaranteed annuity rate”, which gives the saver the right to buy an annuity at the rate offered at the time the pension was created. There could also be tax advantages to keeping hold of small pension pots worth less than £10,000.
The crucial thing is to keep track of your pensions.
Admittedly, that can be easier said than done. Pension companies change their name. They merge with other pension companies. You move addresses and forget to inform them of your new one. They are not a detective agency. If you are not responding, they have no means of contacting you.
In short, there are multiple ways of losing touch.
It may all sound tedious and boring admin; nevertheless, you need to stay on the ball. Set up a computer file purely for pensions and/or a hard copy box file. Make sure every communication goes in there and review it all at least half-yearly.
Make sure you keep a copy of each latest statement and log in details for online, paperless pensions.
Amidst all this, one of the golden rules is to make yourself aware of how your pension fund or funds are doing. Examine risk levels. Are you happy with how your money is invested and managed? Could it be performing better?
How much are you paying in fees? Some older pension schemes charge 1.5 per cent. Yet the average fee on defined-benefit schemes is 0.48 per cent. The difference can be very significant – thousands of pounds – when it comes to retirement. Nest, the government-run pension scheme with 11 million members, charges just 0.3 per cent.
Keep your death benefit nominations up to date and make sure that your family/executors have access to a list of your pensions. They can’t claim if they don’t know about them.
If you are in real disarray, sit down, rack your brains, and make a list of your former employers or your old pension provider. It is you who will be the one to turn detective. Get on your computer and chase down the clues. Ask old work colleagues for information and guidance.
Failing that, the government-run Pension Tracing Service, can help.
It claims to have uncovered more than £350 million of pension treasure since 2013. That is the tip of the iceberg. It is estimated there is £20 billion in lost pensions, 1.6 million of them.
As ever, it is always wise to take independent advice before transferring pensions.