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5 tips for managing your pension pots

It's easy to lose track of workplace pensions if you change job often, but these little pots of cash could help boost your retirement income.

 

by Michelle McGagh on Jul 24, 2012 at 09:17

5 tips for managing your pension pots

As the government tries to tackle the problem of small pension pots, new research shows almost 70% of Brits have no idea how much their pension schemes are worth collectively.

A survey by insurer Friends Life reveals the majority of savers in the UK do not know the collective value of their pensions and 10% have no record of corporate pensions held with previous employers.

Women were shown to be more apathetic towards their pension than men, with 72% unaware of the value of their pots, compared with 64% of men. Women were also less likely to keep track of pensions documentation, with 11% having no record of all their pensions compared with 9% of men.

The research shows 30% of Brits have pension pots with two or more employers, and 5% are unsure of how many pots they have.

Don't lose track of your pension pots

The Department for Work and Pensions (DWP) believes there are a million small pots in the current system. Friends Life believes these pots have the potential to become untraceable, and estimated the worth of the pots stands at £200 million – which could be lost if people do not keep track of their pensions.   

The workplace pension system in the UK is far from ideal; when you change employer your pension fund does not follow you, it sits with your former employer and you start saving into a new scheme with your new employer.

As people change jobs on average 11 times in their life, this creates lots of small pension pots – many of which end up being forgotten about or abandoned.

Changes ahead

The DWP has announced plans to introduce a ‘pot follows member’ system to keep pensions savings in one place and ensure only one set of charges is paid, rather than multiple pension charges being levied across all pots.

When it comes to charges, 40% of those surveyed by the insurer believed they were not paying any charges on their pensions, and a further 26% said their pension charges were paid for by the employer.

Colin Williams, managing director of corporate benefits at Friends Life, said the research shows people are not paying enough attention to their pensions.

‘We believe that every year individuals are losing out on significant savings held within pension funds that they are unaware they have,’ he said.

‘It is imperative that people are aware of where their money is and what it is doing for them. Too often pensions are deserted and not considered properly before it’s too late.’

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3 comments so far. Why not have your say?

Gordon Watson

Jul 24, 2012 at 12:49

A lot of good advice for both Defined Benefit and Defined Contribution members of Company Pension schemes. You need to know how much you are due from any scheme to which you have contributed.

Please make sure the managers of every scheme know your Current Address.

You would not believe the money which has to be spent by pension funds trying to trace deferred pensioners! Even if you are an employee or a pensioner make sure your address details are up to date!

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Rightcharlie

Jul 29, 2012 at 05:56

Wow, 40% of people didn't realise the horredous charges made by all pension funds, is the nation really that stupid??? Looking at all the brand new Audis in my local Finacial Adviser's car park, obviously they are.......but not let's forget, the Financial Planning industry does do a good job of covering up these scandalously high charges!!

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FAIR DEAL

Jul 30, 2013 at 09:29

Yes to that comment. Charges are not revealed in the Annual statement supplied to pension customer and I know of one major company that gives % rate growths of the fund that does not include charges which would have resulted in NEGATIVE figures and sent alarm bells ringing.

Several companies have signed up for a system where charges are revealed as on a credit card statement but then they want IFAs to take responsibility for the actual pension deal sold so that there is no comeback on the pension company.

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