This blog focusses on a very real problem of perhaps 5% of everyone saving for their retirement. They can’t find their money.
I argue that we are obsessed with the imaginary consequences of people taking control of their pension pots while ignoring the grim reality that many people have pots but have no way of accessing them – because they’ve lost them!
Those involved in pensions worry about imagined losses
There is a body of opinion amongst my generation of so-called pension experts that we should do whatever we can to stop consumers harming themselves by taking bad decisions. This has resulted in
- The red flag regime – where trustees and administrators obstruct the free passage of Dc pension transfers as savers try to consolidate
- The delays to the pension dashboards which may be with us in 2024 (but not as consolidators)
- The glacial progress of the small pots initiative which is currently stalled over technical arguments of the Minimum normal retirement date.
All three instances of our failure to see the bigger picture. Rather than obsessing about the chances of losing money, let’s work on the money which has been mislaid – mislaid money is lost money – it had better be found and it dwarfs the wildest dreams of scammers.
While in the real world – we count lost pensions in the billions.
The PPI gave us some interesting insights into the “lost world of pensions” this week. We are not talking here of pensions or pension pots that have been stolen by scammers but of pensions that have been mislaid by their beneficiaries because they’ve moved house, moved jobs or forgotten who is looking after their money. In many cases the name of the organisation looking after their money has changed so it’s not a case of forgotten, more a case of being forgotten.
The scale of these losses is huge
Nearly 3m pots are “gone away” – lost to their owners, awaiting finding.
There’s £26.6bn of lost assets in these pots, that’s big even by Big Government standards.
And the value of these pots is diminishing as people move job and houses more often and as more people find themselves in pensions funded at the bare AE minimum.
And as ever, the smallest pots are owned by women who are often enrolled from part-time work. The PPI has worked out that the average lost pot for women is less than £6,500 which might sound insignificant to an actuary but it could be a year’s earnings for many women.
Let’s put these tables together and find a statement that you could explain to people to get them to understand why “lost pots” is ten times the problems that “red flags” , “dashboard delays” and “small pot stagnation” concern themselves with.
How about this?
“Nearly 3 million pots have gone missing with £26bn of assets. Each pot is worth £10,000 – the price of a reasonably priced family car or a holiday of a lifetime for two”
This is right up there with PPI as a claimable event and the only reason that this is not being given more publicity is that we know that with the dashboard around the corner, we are on the verge of the biggest orphan assets claim in the nation’s history.
This should be a cause for celebration, but I don’t hear any champagne corks popping because:
- These pots are earning someone fees and as many of these pots are legacy, these fees could be huge – think 4-5% pa if capital units are involved.
- If you are 55 or over you can wipe out these big “back-end” fees and transfer your pot for a maximum 1% exit penalty. That could save you thousands
- We seem petrified of telling people the truth about their pensions fearing some invisible ambulance chaser will appear out of the digital ether to remind Joe Punter just how badly of these pots have performed over the years
Which begs the question , why are we wanting to push the pension dashboard’s data availability point and go live date backwards, rather than pull if forwards?
People who read this don’t have to wait till 2025 to find their or their loved ones pensions!
National Pension Tracing Day – what about you?
I supported National Pension Tracing Day – 30th October 2022 last year and I’m supporting it again this year.
National Pension Tracing Day is this Sunday (October 30th) and here’s what the people organising it, can do to help you.
Click on the link below and get going
Why Join The Hunt? – National Pension Tracing Day – 30th October 2022
- We shouldn’t be waiting a day longer to sort this problem
- Bring on the dashboard!
- Resist red flag mania!
- Let small pots be exchanged for big pots!
- And let’s use Pension Tracing day , to ease this growing scandal of lost pensions!
Getting auto-enrolment going by requiring employers who offered no pension to set up DC schemes got AE done. But it seems to me the obvious way forward is to shift to a system in which employees choose their DC pension provider. On joining a new employer, you give the employer your bank details for your salary and your pension details for your pension contribution. On moving from employer to employer, you keep the one DC pot.
It would be interesting to see some breakdown of the under 55s who have “lost” their pension. I suspect that many of them are now living abroad, given the amount of international migration and the numbers returning to mainland Europe following Brexit. The number of such people with UK pensions was swelled by auto enrolment.
So how is National Pension Tracing Day being advertised in Poland and Japan? And will pensions dashboards be advertised abroad and will they be able to validate anybody without a UK address or UK identity documents or a UK bank account? Or would the UK and the UK pensions industry prefer that these pensions remain lost?
I had a customer last week who has a pension effectively trapped in the UK. The provider won’t pay to a foreign bank, the bank have closed her account, no UK bank she has approached will let her open a new account, she can’t find a QROPS to transfer to and even if she could, there would be hefty fees and tax to pay. It was a modest amount, £30k I believe, so she’s persevering but if it had been under £10k most would give up.
This is bonkers- Martin. I can see how it’s happened- but bonkers!