Save, make, understand money


Savers set 'for national crisis' with £50bn in lost pension pots

Savers set 'for national crisis' with £50bn in lost pension pots
Matt Browning
Written By:
Matt Browning

Almost five million savers have their pension pot lost in multiple or abandoned accounts, contributing to a £50bn black hole, a study finds.

One in 10 workers believe they have a lost pension pot with a value of at least £10,000, according to an analysis from the Centre for Economics and Business Research (CEBR).

A ‘lost’ pension is when there is no direct connection to a pension pot and occurs when you change job and, with the new role, are signed up to a fresh pension plan. If you do not amalgamate the funds available, because there is no direct connection to the different providers, the funds are deemed to be missing.

Workers aged under 35 years old tend to swap jobs more frequently than older employees, so have on average accrued 2.4 pension pots. By the time today’s youngest workers reach retirement age (68 years old), they are forecast to have five pots – increasing the likelihood of their funds getting lost.

This is evident in that a quarter of those younger workers surveyed by PensionBee think they have lost a pension pot, compared to just 8% of workers over 55 who think so.

Older workers less likely to lose pension pots

Despite working for longer, employees over the age of 55 will have an average of just 1.7 plans, which is why so few of that cohort believe they have a lost pension.

With an increase in job switching and an auto-enrolment regime, the total number of pension accounts in the UK is expected to reach 243 million by 2050 – leaving millions susceptible to missing out on vital retirement funds.

To combat the issue, Chancellor Jeremy Hunt outlined in his Autumn Statement last year his plans to give employees the chance to choose their own provider. This ‘pension pot for life’ would mark a change from the current arrangement, where employers decide which pension scheme provider their workers have.

The Government confirmed in the Spring Budget that it was still exploring the idea, but no official plans have since been announced.

‘Keep track of old paperwork and policy numbers’

Becky O’Connor, director of public affairs at PensionBee, which won Best Pension Platform – Large Portfolio at the YourMoney.com Awards 2024, said the amount lost in pensions “is set to reach national crisis levels over the coming years.”

So that workers do not miss out on their contributions, O’Connor urged those in employment to be organised when it comes to their retirement funds.

O’Connor added: “For anyone who loses track of pensions, the result can, unfortunately, be a poorer retirement. It’s important to keep track of old paperwork, employer and pension provider names and policy numbers and, if you would prefer to keep pensions together, consider consolidating them in one place.”

Christopher Breen, head of economic insight at the CEBR, said: “Given this trend, it’s important that the Government provides the necessary support and guidance for people to manage their pensions efficiently.

“With a rapidly ageing population, a healthy private pension system is vital for the long-term sustainability of public finances.”