Are you owed an unclaimed pension pot? Thousands of savers are missing fortunes from unclaimed nest eggs
1.6million pension pots are waiting to be claimed
There are services that offer to track down lost pensions
There is around £400million in unclaimed pension savings, according to the government
· Millions of pension pots are lying unclaimed and could provide a vital income boost to people in retirement.
· Here is what you need to do to track them down.
· Nearly 1.6 million pension pots are waiting to be claimed by people who have lost touch with their retirement savings over decades of employment – known as “gone-aways”
· Using your National Insurance number, if you are a “gone-away”, you can find your pot from your Pension Providers.
· People who think one of their pensions may have gone astray can ask to search its database to see if their plan is on it.
· The service is free to use and paid for by pension companies – although not all providers are currently signed up. It is similar to the Government’s Pension Tracing Service which assists people in hunting down both workplace and personal pensions.
VALUE OF LOST INCOME
There is around £400million in unclaimed pension savings, according to the Department for Work and Pensions. Research indicates that the average unclaimed pension in the private sector would provide an annual income of £3,000 – up to £7,000 a year in the public sector.
The majority of orphan pensions are defined benefit based – also known as final salary – while a fifth are defined contribution, sometimes referred to as ‘money purchase’ schemes.
WHY PENSIONS GO AWOL
A recent survey concluded that there are a multitude of reasons why people lose track of pensions. They include moving house and not informing a provider of a forwarding address; lost paperwork; companies closing down after they left or merging with another; and forgetting about a pension contributed to early in working life.
The Pensions Advisory Service, which receives calls from people searching for lost retirement savings, says: “It is a requirement of most pension schemes to send you a benefit statement each year. If you have moved and the statement does not reach you, the pension provider may try to find you.”
WHY IT IS IMPORTANT TO TRACK DOWN ALL PENSIONS
Many people struggle to adjust to living on a lower income after giving up work. So ensuring all your pensions are paying you an income is vital. Income in retirement is certainly one area where the adage “less is more” does not apply.
People who had multiple jobs may have forgotten they were saving into a particular pension plan. This money could be the difference between a difficult retirement and a comfortable one. Few people work with the same employer all their working lives so it’s possible they may have more pension pots stashed away than they realise.
PREVENTING THE PROBLEM IN FUTURE
Nine in ten people surveyed believe Pension Providers are not doing enough to trace people with lost pensions. Some support the idea of a ‘pensions dashboard’ for helping people keep a tab on their savings. This is a Government plan to allow individuals to view all their pension arrangements in one place.
It won’t just help people to keep track of their pensions. It will also provide performance details and fees levied – something the pensions industry is not good at. In the meantime, savers must remember to contact Pension Providers with any change of address.
HOW TO TRACE A LONG LOST PENSION
The first step to reunite yourself with long-term savings is to compile a list of employers you worked for and marry them up with your pensions in payment. If there are companies you worked for which are not paying you a pension, even though you contributed into one, contact their pension department and provide as much information as possible – National Insurance number, period of employment, the role you held and your current contact details. They should then confirm whether there is a pension due to you – now or in the future.
You can also input your National Insurance number into a free-to-use website to see if any details come up. Alternatively, turn to the Government’s Pension Tracing Service. Its database holds details of more than 320,000 pension schemes and is also free. Entering a former employer’s details into the search engine will produce contact details for schemes you may have paid into.
WHAT IS PENSION FREEDOM?
Pension freedom reforms have given over-55s greater power over how they spend, save or invest their retirement pots. Key changes from April 2015 included removing the need to buy an annuity to provide income until you die, giving access to invest-and-drawdown schemes previously restricted to wealthier savers, and the axing of a 55 per cent ‘death tax’ on pension pots left invested.
Also, savers aren’t limited to one chance to take a single tax-free lump sum worth 25 per cent of their pension pots, with the rest taxed as income afterwards. Instead, people can dip in and make as many withdrawals as they want, each time getting 25 per cent tax-free and the rest taxed like income, provided their scheme allows this.
The changes apply to people with ‘defined contribution’ or ‘money purchase’ pension schemes, which take contributions from both employer and employee and invest them to provide a pot of money at retirement. They don’t apply to those with more generous gold-plated final salary or ‘defined benefit’ pensions which provide a guaranteed income after retirement.
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