New research by pensions advice specialist Portafina has revealed that one in 10 (10%) workers have no idea if they have a pension from a previous job, meaning that millions of people could be missing out on thousands of pounds in retirement.
Despite the fact that more than 10 million Brits have been enrolled in a workplace pension since the introduction of auto-enrolment, it’s concerning that only a quarter (25%) of those surveyed know that upon moving jobs their new employer will set up a new workplace pension for them, and that it is their responsibility to manage old pension pots.
When it comes to old pensions, three-quarters (76%) of Brits claim they are unaware of their value today. Left unchecked, old pensions could be eaten away by high charges and poor performance meaning when reaching retirement, there could be a lot less in the pot than expected.
A staggering 71% of pension holders in defined contribution schemes do not know what charges they are paying. Yet, reducing your pension’s annual charge by just 1% a year now could mean over £27,000 more in your pot. Likewise, improving your pension performance by 2% a year now could mean £54,000 more in your pot when you need it.
The growing trend to use digital platforms to move or consolidate pots without taking advice could also mean that Brits are missing out in retirement as unbeknown to them, they could be giving up valuable guarantees and benefits attached to old pensions.
A whopping 90% of Brits admitted to not seeking financial advice when it comes to moving or consolidating an old workplace pension. When asked whether they were aware of the guarantees and benefits attached to a past pension, three quarters (77%) said they were not.
Commenting on the findings, 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.”
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