Almost 150,000 lose their pension


high angle view of an elderly woman in the swimming pool; smiling

The government has revealed that last year its Pension Tracing Service helped almost 145,000 people find pensions they had lost somewhere in the mists of time. They reported the excellent news that this was more than double the number of people who used the service in 2010.

But is this really good news? Or is it worrying that so many people are losing pensions in the first place?

Good news

The Pension Tracing Service helps people to find occupational and personal pensions that they have lost track of. It uses a database containing information on more than 200,000 pension schemes. If you contact the service with details of where you worked and when - or the name of the pension company you think you held a personal pension with - they will provide contact details of the potential scheme administrator - so you can then make contact with them direct.

Minister for Pensions Steve Webb was adamant that the fact that so many people were using the scheme to get their hands on money that had been missing for years was excellent news.

Bad news

However, as Tom McPhail, Head of Pensions Research for Hargreaves Lansdown, points out: "On the one hand it is good news that so many people have been reunited with their dormant pension rights, however it is also unfortunate that so many people managed to lose track of so much money in the first place."

The problem is that the days when we all worked for one employer during our career - so had one pension to worry about - are long-gone. Nowadays the government's own figures show that the average person has 11 jobs in their lifetime. In some instances it can mean having to keep the paperwork carefully for 11 schemes, update them when we move house, and regularly check they are performing as we expect.

In reality many people don't have the time or the organisational skills to make this happen.

And worryingly this trend could get even worse. By 2018 all employers will have to provide a workplace pension - with the employer and the employee both automatically contributing to it unless you opt out. The government calculates that this could mean there are 50 million dormant and lost pension pots by 2050.

Keep track

It means it will be essential for us to take responsibility for keeping track of all our pensions in future.

McPhail points out that the fewer pension arrangements you have, the easier they are to keep track of. He suggests: "Whenever you change jobs, look at whether there is scope to consolidate your pensions, for example by transferring from your old employer's scheme to your new one." Although he says it's important to check what benefits you might lose if you make a transfer.

Even this will leave you with a number of schemes, so make sure you have a note of them, and when you move house, you'll need to contact them to update your details on their system - it's worth adding any company you hold investments or savings with to this list - as well as your current employer. McPhail says it doesn't have to be an onerous task as long as it's one you manage properly from the outset.

Unfortunately it's not a task that has any end - because even after your death, your spouse and dependents will need to know about investments and pensions which may contain benefits for them on your death. McPhail says the best way to do this is with a simple asset register stored securely with your will.