How much of 3bn unclaimed pension pot are you owed
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UPDATED:
20:09 GMT, 12 May 2012
Pensions have been hitting the headlines and this has triggered a surge of enquiries from people who want to know the value of their retirement savings, or more pertinently, where they have gone. Independent advisers, insurers, Government departments and Financial Mail are seeing an increase in calls from anxious savers.
John Greenwood, chief executive of Creechurch Capital, an Isle of Man-based investment manager with offices in Manchester and London, is among firms reporting a big rise in enquiries. ‘A significant number of people are coming to us with no idea of the value of their pensions, or who can’t find them,’ he says.
In the autumn, when all employees will start to be enrolled automatically in workplace pension schemes, even more questions are likely to be asked.
Pooled funds: Simon Cook needed help to track down his money
Human resources company Aon Hewitt
estimates one in three employees might contact their firm with questions
in the first month of pension deductions. Many pension queries are
complex, but there are several basic ways in which savers can get
information and simplify affairs.
As companies change their name or
cease trading, millions of workers lose track of their pension pots. A
staggering 3billion lies in unclaimed occupational and personal
pension funds.
The Pension Tracing Service, which is
free and run by the Government, can help you find a pension you have
lost track of, even if you don’t have any paperwork or the contact
details of the provider or old employer.
More than 350,000 have used the
service since it was set up in 2005 and claims result in a weekly
pension of 16 on average or a 1,900 lump sum.
Gather any information you have about
your old employer, including names it may have been known by in the
past. Also make a note of when you were paying into the scheme. The
Pension Tracing Service will then use this to compare your details
against the 200,000 plans on its database.
It should be able to hand your
details over to the scheme’s administrator. You contact it to ask for
your pension details, or for the pension to be paid, depending on your
age.
The Pension Tracing Service is
available through direct.gov.uk, where there is also a downloadable
application form. Or call 0845 600 2537.
Be wary, a number of companies have
sprung up offering to find lost pensions, savings, Premium Bonds and
other assets for a fee. Many use official-sounding names in the hope of
tricking users into thinking they are backed by the Government. But
there is no need to pay to trace lost pensions or savings. As well as
the Pension Tracing Service, the banks and building societies together
with National Savings and Investments offer a free tracing service for
lost savings accounts at mylostaccount.org.uk
Like many workers who have changed
jobs as they have climbed the career ladder, Simon Cook, 42, had lost
track of a range of company pension schemes from old employers. When
Simon, a bond trader for an investment bank in the City of London,
approached Creechurch Capital to help him locate his lost savings, he
had six work pension schemes and two personal pensions.
But as well as help in tracing them
Simon also wanted to pool all the cash into one self-invested personal
pension – a Sipp – to give him a clearer picture of his retirement
savings.
A Sipp can suit some investors who
want to have full control over how their cash is invested and also when
and how much they invest, subject to certain limits.
These plans have the same tax
benefits but tend to be more flexible than traditional pension schemes,
allowing investment in a range of different assets. However, the annual
charges imposed by providers tend to be higher than those on traditional
personal pensions.
‘I’ve worked for five banks and in
three different countries. I’ve also moved house seven times,’ says
Simon, who lives with his wife Paola and their two children, Peter, 8,
and Emma, 6, in north London.
‘It means my paperwork wasn’t in good
order. But Creechurch tracked my pension pots down quickly, even with
the scant information I had.
‘They then got transfer values from the schemes and pooled my funds so that I could hold them all in one place within the Sipp.’
Some of Simon’s old company pensions
were final salary or defined benefit schemes. These are usually much
more generous than money purchase or defined contribution plans.
With a final salary scheme, the
benefits are linked to the wage you end up on at the company together
with length of service. They sometimes also allow more than 25 per cent
to be taken as a tax-free lump sum at retirement age. In contrast, money
purchase schemes are invested in the stock market so there is no
guarantee of what the final retirement income will be.
Tom McPhail, the head of pensions
research at Bristol-based independent financial adviser Hargreaves
Lansdown, says transferring cash out of a defined benefit scheme is
rarely the best option because these valuable benefits are lost. He
recommends investors seek advice before consolidating such plans.
‘Start with the assumption that you
are better off staying put in the final salary plan,’ he says. ‘Watch
out for transfer penalties and any guarantees you might be giving up.’
Simon says he knew of the risks in
cashing in his final salary schemes, but says he made an informed
decision and is happy he has done the right thing for his needs.
‘The value and benefits in the final salary schemes was not sufficient to warrant me leaving them where they were,’ he says.
‘On balance it was more important to
have all the funds in one place and for me to have control over how they
are invested. It is also much easier having all the administration
coming from one place. It means that I shouldn’t lose track of my
pension again.’