Ghost Pensions: tracking down lost pots

In today’s complex financial landscape, the issue of ‘ghost’ pensions - pension plans that exist on paper but are not actively funded nor ‘managed’ - has garnered increasing attention. As globalisation and the job universe evolves, so too does job mobility. As a result, many individuals find themselves grappling with lost or forgotten pension benefits. With this backdrop, it is easy to see how ghost pensions begin to emerge over time. This article delves into why the issue of ghost pensions is growing, the importance of finding lost pensions, and what steps to take once they are found.

Arrange a free initial consultation

Why the issue of ‘Ghost Pensions’ is growing

Recent estimations by the Centre for Economics and Business Research revealed that 22% of UK workers believe they have lost a pension pot, with total misplaced retirement savings likely to exceed £50 billion. Between 2012 and 2017, the Government introduced auto-enrolment in stages, which involved a minimum commitment of 8% of a worker’s qualifying earnings being added to a workplace pension scheme (subject to conditions). Consequently, we have seen a significant uplift in the number of people putting money aside for their future. However, prior to auto-enrolment, only around half of UK employees had a workplace pension. 

Increased job mobility:

With auto-enrolment in mind, as individuals change jobs more frequently than in previous generations, they often leave behind pension plans that can become difficult to track. This is particularly true for younger workers who may work for multiple employers throughout their careers. Each transition increases the risk of losing track of benefits and in turn, this could eventually lead to a lower pot to fund your retirement if forgotten about.

Poor record-keeping: 

Many companies, particularly smaller ones or those facing financial difficulties, may not maintain accurate records of their pension plans. Over time, this neglect can lead to individuals losing track of their benefits, particularly if they do not receive regular statements or updates.

Aging population: 

As the baby boomer generation retires, the number of individuals searching for lost pensions is increasing. Many retirees are discovering that their pensions, which they believed would be a stable source of income, are actually ghost pensions due to lack of funding or proper management.
These three factors heighten the importance of ensuring you have a clear understanding of all the retirement benefits you have accumulated over your life, so that you know what is available to you in your years after work.

The importance of finding lost pensions

We are all busy people and as the weight of day-to-day life takes hold, people often tend to put bureaucratic, paperwork-heavy tasks to the bottom of the proverbial pile. However, your future self will one day thank you for taking the time to get ahead of your pension management as early as possible. 

Financial security: 

Pensions represent a significant part of an individual’s retirement income. Finding a lost pension can make a substantial difference in financial security during retirement. Many retirees rely on these funds to maintain their standard of living, and any lost benefits could dampen your retirement expectations.

Legal rights: 

Individuals have legal rights to their pension benefits, and understanding these rights is vital. Failing to locate and claim a pension can result in forfeiture of funds that the employee has earned over the years. Knowing your rights ensure you take necessary actions to reclaim your benefits.

Emotional well-being:

 The uncertainty surrounding lost pensions can lead to anxiety and stress, particularly as you approach retirement age. Finding and securing these funds can provide peace of mind, allowing retirees to focus on enjoying retirement rather than worrying about financial instability.

How to find a Ghost Pension

Finding a ghost pension can be a challenging task, but several strategies can help streamline the process:

1.  Start by collecting as much information as possible about your previous employment. 
   This includes:

• Names of past employers
• Dates of employment
• Job titles and departments
• Any pension scheme details you might remember

          2.  Check with Former Employers

Contact the HR department of your previous employers. They should be able to provide information about any pension schemes you were enrolled in. If the company has merged or gone out of business, try to find out who took over the pension obligations.

          3.  Use the Pension Tracing Service

The UK government offers a Pension Tracing Service, which is a free service to help you find lost pensions. Here’s how to use it:

• Visit the Pension Tracing Service website.
• Fill out a form with the details of your former employers.
• The service will help connect you with the pension scheme administrators.

What to do once you find your Pension

Once a ghost pension has been located, the next steps are crucial to ensure that benefits are secured:

Gather documentation: 

Collect all relevant documentation, including any statements or correspondence related to the pension. This may include records from previous employers, plan documents, and identification information. You can then provide the pension provider with the details to obtain your plan information.

Review your options:

Once you have clarity on your benefits, review your options. Depending on the plan, you will have a variety of income options available to you. These typically vary from each plan, and older pensions can have much more limited options available to you. Consider what features are right for you and whether this is offered in your existing arrangements. 

Stay informed: 

After reclaiming your pension, keep abreast of any changes to the plan or funding status. Regularly update your contact information with the pension plan administrator to ensure you receive timely communications.

Consider financial advice: 

Depending on the amount and nature of your pension, it may be beneficial to consult with a financial adviser. We at TPO provide holistic advice on pension and retirement planning to remove the anxiety you may have around your future. 

How we can help

Navigating the complexities of pensions is essential for securing a stable financial future in retirement. With the potential for lost or forgotten pension benefits increasing, it’s crucial to take proactive steps to locate and reclaim these funds. Utilising resources like the Pension Tracing Service, consulting with former employers, and exploring online databases can significantly help.

At The Private Office, we understand the challenges individuals face when planning for retirement, with our team of experienced financial advisors dedicated to helping clients navigate these complexities. If you’re concerned about your financial future, why not get in touch. We’re offering all those with £100,000 or more pensions, savings or investments a free cash flow forecast worth £500, to visualise if you’re on track for the retirement you want.

Arrange a free initial consultation

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate cash flow planning.