It’s estimated by the UK’s Pension policy Institute that the nation’s savers have collectively lost track of an eye-watering £31bn worth of pensions. Analysis has shown more than three million pension pots are currently unclaimed by their owners, something that is seen as a consequence of more than a decade’s worth of confusion since the process of pension auto-enrolment began back in 2012.
Whilst undoubtedly a well-intentioned initiative designed to get the population to take greater responsibility for their retirements, poor levels of underlying financial literacy, a more dynamic jobs market and significant consolidation in the investment industry have all been driving forces in the confusion that has resulted in this huge pool of stranded savings.
It’s not just a simple number, either. If these pension pots remain lost, not only will retirees be worse off, it presents an added burden to the state in terms of top-up payments whilst it also has the potential to deprive the Treasury of tax revenues – and all whilst the pension fund collects its management fees. Collectively, if all those stranded pensions were to belong to people who had already retired, unlocking them could lead to an immediate 1% bounce in the country’s GDP.
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But fear not, the government has a plan, as ultimately it’s the National Insurance number that acts as the record of truth, tying the pension to the owner. So in 2014 (yes, you read that right) the FCA came up with a plan – a pensions dashboard that would allow pensions savers to better engage with their retirement funds. The government finally backed the scheme in 2016, legislation has been developed since – but the dashboard is only now nearing a usable level of readiness.
Pension dashboard deadline set for October 2026
A deadline has been set for pension providers to be connected to the dashboard by October 2026 – a mere 12 years after the idea was first floated and a decade since it was announced to Parliament in the budget. Once that’s done, apparently it will be at least a further six months before individuals will be able to access the information it holds – which will hopefully be complete.
Chris Gawne, founder of the pension provider and tracing service eurikah, commented: “It’s widely known that the vast majority of those saving for retirement today already aren’t doing enough to fund a comfortable standard of living. Missing out on potentially significant sums because people have simply lost track could make a material difference to their standard of retirement living.”
Gawne is also optimistic that the pensions dashboard will act as a genuine catalyst when it comes to savers understanding what they need to do to achieve that comfortable retirement, reinvigorating the whole conversation about how attitudes need to shift.
“There’s a wealth of evidence out there showing not only that we are failing to save enough for retirement, but that the investment vehicles we use aren’t fit for purpose either. We have to move away from the mantra of simply making bigger pension contributions for a longer period of time. Those starting their retirement savings journey today could already be investing for 50 years before drawing that pension, yet the obsession with overly cautious portfolios even over that time horizon prevails”, Gawne concludes.
Fully automated solution can’t come soon enough
The UK government did launch a manual pension tracing service back in 2016, but challenges here have included employers having been acquired, a lack of clarity over which trading division of a company was actually responsible for the management of the pension and consolidation between workplace pensions providers over time. Users of this process have reported lacklustre results with significant levels of interaction being necessary to identify and then release the missing pension pots.
A comprehensive and fully automated solution cannot come soon enough – but the industry now needs to make sure once these pension pots are rediscovered, savers have the tools at their disposal to make sure their money truly starts working for them.
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