Is it worth combining my old pensions with my new provider? I think have two pots from previous jobs, although I’m not entirely sure how to find them. Any help you can provide on either of these points would be gratefully appreciated!

Anonymous

Tom Selby, AJ Bell Head of Retirement Policy, says:

The success of automatic enrolment in getting millions of people saving something for retirement, many for the first time, has exacerbated the problem of ‘lost’ pension pots.

The combination of people switching jobs regularly – around 11 times over the course of a lifetime according to some estimates – and auto-enrolment is creating a vast and hugely valuable sea of retirement money that has become disconnected from its owners.

The pandemic is likely to have spurred an acceleration in career moves over the last four years, driving a £7.2 billion surge in the estimated value of lost pensions, according to research published last week by the Pensions
Policy Institute.

There is also some evidence that more people have been moving house since 2018, with the proportion of people having lived in the same house for more than 30 years dropping from 16.6% to 13.1% during that period. Moving house is another key reason why people lose touch with their pensions.

The average value of lost pensions has dropped since 2018, in part because we are likely seeing more lower value pots going missing. Despite this, the average lost pension is still estimated to be worth well over £9,000 – not the sort of money you would normally find down the back of the sofa.

There are plenty of reasons why combining your pensions with a single provider can be a good idea. Most obviously, a single retirement fund is much easier to track and manage than having various pensions with different providers.

You could also benefit from lower costs and charges, increased income flexibility and more investment choice by switching provider.

Older pension schemes, for example, often charge more than modern pensions, while plenty of workplace schemes don’t offer a full range of retirement income options or restrict your investments to the firm’s own in-house funds.

Before transferring any old pensions, you should check there aren’t any valuable benefits attached which you may lose or exit charges that will be applied. Your provider should be able to tell you if this is the case.

If you do decide to consolidate with a single provider, assuming these are ‘defined contribution’ pensions – where you build up a pot of money which you can access from age 55 – the process should be relatively simple.

If you have a ‘defined benefit’ (DB) pension valued at £30,000 or more, you will need to take regulated financial advice before transferring.

You’ll just need to choose a provider with whom you want to consolidate your pensions and get the details of the pension or pensions you want to transfer over. Once you’ve given the relevant details to your new provider, they should do all the legwork for you.

The Pension Tracing Service is a useful tool to locate missing pensions. From next year, pensions dashboards will begin to be rolled out which should allow you to see all your pensions in one place, online.

DO YOU HAVE A QUESTION ON RETIREMENT ISSUES?

Send an email to asktom@sharesmagazine.co.uk with the words ‘Retirement question’ in the subject line. We’ll do our best to respond in a future edition of Shares.

Please note, we only provide information and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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