Workers are being urged to check for lost pension pots, as forgotten savings average more than £6,000. Investment platform AJ Bell has shared advice for savers, noting that many people have had multiple employers throughout their careers, each potentially enrolling them in a pension scheme. With each employer typically selecting its own plan, tracking funds contributed across different jobs can be challenging.
As a result, billions of pounds in pension savings are estimated to be held in pots that workers have lost track of or forgotten. Earlier this month, the Pensions Policy Institute (PPI) published research estimating around 3 million lost pension pots exist across the UK.
How to find lost pensions
AJ Bell says it is "worth checking if there are any with your name on them that could boost your retirement income without costing you a penny." The firm added: "The government’s Pension Tracing Service is a useful tool to locate missing pensions, and some providers may also be able to help."
AJ Bell itself offers a ‘ready-made pension’ service and pension finding tool, "which allows people to find pensions and combine them into a ready-made pension account." Other options are available from companies including PensionBee, Moneybox, Aviva, and others.
Before transferring any old pensions, AJ Bell warns that "you should check there aren’t any valuable benefits attached, which you may lose, or exit charges that will be applied." It adds: "Your provider should be able to tell you if this is the case."
Making the most of contributions
AJ Bell advises savers to use a pension calculator after finding their pensions, which allows them to input savings so far, monthly payments, and planned retirement date, showing the pot they are on track to build and the expected income. The tool also lets savers adjust figures to see the impact of paying a little more each month.
For those making the typical minimum 5% contribution under auto-enrolment rules, AJ Bell suggests checking with an employer whether they will match extra payments, up to a certain level. Many employers offer matching alongside the typical minimum 3% contribution, and savers could be missing out on extra ‘free money’ if they overlook it. If no extra is on offer, other pension options could be considered, including a SIPP, accessible from age 55 (rising to 57 in 2028).
Boosting contributions and investment growth
If higher contributions are not affordable now, AJ Bell recommends pledging to pay more when receiving a pay rise or working longer hours. Paying a certain percentage of salary means contributions automatically rise when income does, though it is also worth revisiting payments with each pay rise and considering one-off payments from bonuses, gifts, or lump sums like a Premium Bond win.
On investment, AJ Bell notes that most people do not make an active decision, leaving their pension in a default fund in a workplace scheme, which may be fine for the average person. However, making active investment choices could ensure investments are right for individual needs and work harder. While workplace pensions offer limited choices, a SIPP provides greater opportunity to tailor a portfolio to long-term plans and objectives.
Planning retirement income
On tax-free cash, AJ Bell says there is nothing wrong with taking it at any stage, as long as it is factored into plans from the outset. If needed to produce income in retirement, it should not be considered separately from the overall retirement pot, and a pension calculator can show the impact on annual income if tax-free cash is taken and spent.
Drawdown offers flexibility over how much is taken from a pension and when, leaving the remaining pot invested for potentially more growth, and any unused pot can be left to family on death. An online drawdown calculator can help assess whether planned withdrawals are sustainable. An annuity provides an income for life, though inflation becomes particularly important with a longer retirement, and the route removes flexibility over income. This is one reason why people often combine annuities and drawdown, either at the same time or at different stages of life.
Sarah Coles, head of personal finance at AJ Bell, said: “It’s easy to be scared by pensions, with so many alarming figures about millions of people falling short of their retirement goals, billions of pounds being withdrawn off the back of rumours and speculation, and millions of people unable to work long enough to make up for the shortfall. It’s enough to persuade anyone to close their eyes to the horrors and just hope for the best. However, opening your eyes to the risks is the first step to changing your future. If you face your demons, you can radically improve your pension prospects with some simple steps, so there’s nothing to fear from your retirement finances.”
