New research by Portafina - pensions advice specialists - has revealed that 10 per cent of workers are not aware if they have a pension from a previous job, meaning that 34m could lose out on millions of pounds by not tracking their old pension pots.
With regard to old pensions, 76 per cent of UK workers state that they are unaware of their value today. If not checked, high charges and poor performance could drastically reduce the amount in the pot when retirement is reached. Only 25 per cent of workers surveyed realise that on moving jobs a new workplace pension will be set up by the new employer - but they are responsible for managing their own old pots.
The problem of pensions being forgotten is expected to worsen as a result of auto-enrolment - as since this was introduced more workers are enrolling in pensions schemes, but were not found to understand their pensions any better.
In the research, it was found that 47 per cent of employees do not know how auto-enrolment works - with 1 in 7 stating that they did not know what it means.
A third of those surveyed were not aware of how much they paid monthly into their pension pot and had underestimated how large a pension pot they would require to attain a wage of £15,269 at retirement.
It was found that 71 per cent of pension holders in defined contribution schemes do not know what charges they are paying, despite the fact that by reducing the annual charge by 1per cent a year now, could mean over £27,000 extra in the pot - and improving their pension performance by 2 per cent a year now could eventually mean £54,000 more in the pot.
Of workers questioned about seeking financial advice when it comes to moving or consolidating an old workplace pension, 90 per cent stated that they had not done so and 77 per cent stated that they unaware of the guarantees and benefits attached to a past pension.
Jamie Smith-Thompson - Managing Director at Portafina - said:
“Moving into the digital world is a big positive step forward for the pension industry. Initiatives like the Pensions Dashboard currently being developed by the government will go a huge way towards helping the nation to better manage and keep on top of their pension savings.
While it’s great that there are more online options emerging for moving or consolidating pensions, it can come with huge risk. If it feels too easy to move your pension, such as only taking a couple of clicks to complete the process, then it’s time to think twice about whether this is the right move for your hard-earned savings.
How your pension will be invested, the fees charged, and how your new scheme compares to the old one, are all questions you should confidently know the answers to before making any decisions to jump ship from your current provider.
The bottom line is, it’s best to seek expert help before making any final decisions. Having all your pensions in one place can be very convenient and sometimes saves on charges. But depending on the pensions that you are consolidating, if you are not careful you could end up paying more in charges, losing valuable benefits and guarantees, or seeing your investments placed in funds that are not suitable for your goals.
A regulated financial adviser will analyse every aspect of your pensions, giving you all the facts you need to make an informed decision, unlike most combine-and-go online platforms. With something as valuable as your retirement savings, it makes sense to be absolutely sure.
