The issue of unclaimed cash lying in dormant UK bank accounts has achieved a high profile in recent years, not least with the launch of the Government’s Big Society Capital, a new institution designed to promote social investments and backed with £400m that had lain untouched for at least 15 years in dormant bank accounts.
According to the Money Advice Service, banks and building societies are still holding some £850m whose owners cannot be traced. Other pots of unclaimed cash, however, may be even larger but have attracted much less attention – pension funds, for example. Michelle Cracknell, Chief Executive of the Pensions Advisory Service, believes there is more than £3bn in unclaimed retirement savings.
The Unclaimed Assets Register, which is owned by the credit reference agency Experian, contains details of about 450,000 unclaimed pension pots, mainly in money purchase schemes administered by insurers and asset managers. But James Jones, Experian’s Head of Consumer Affairs, says the company has no firm data on the overall value of lost pensions although it has considered commissioning research to find out.
Michelle Cracknell says there is growing interest among savers in tracking down pots of pension money that they may have accumulated many years earlier, and this is backed up by figures from the Government’s Pension Tracing Service, which helps savers and their relatives find money held in trust-based occupational schemes. The PTS received 76,453 enquiries in 2010/11, 82,867 the following year and 107,335 in 2012/13 – an increase of 40% over just three years.
Part of the reason for this surge of interest can be attributed to the fact that the big post-war ‘Baby Boom’ generation is reaching retirement age and larger numbers of people therefore need to get their affairs in order. Another, overlapping, factor is that people are much less likely to work for the same company throughout their career now than they were one or two generations ago, and they are therefore likely to build up pension savings with a succession of employers. This naturally increases the chances of losing track of some of the money, particularly if they move house and forget to inform previous employers of their new details.
But the problem of people forgetting to inform previous employers of their whereabouts is compounded by another; pension schemes are not obliged to try to track them down, although the Pensions Regulator says it places “a lot of emphasis on scheme governance and the importance of keeping accurate and up-to-date member records”.
“Defined benefit schemes are under no legal obligation to keep in contact with their members,” says Cracknell. “It’s obviously good practice and most of them do, but it’s not a legal obligation. Money purchase schemes have a legal obligation to provide a statutory money purchase illustration every year, but if they do that and it gets returned because the member has disappeared, there’s no obligation to look for them.”
Tracing lost scheme members is expensive, she points out, and so schemes will tend to try only at crucial points, such as when a lost member reaches their selected retirement date.
People can lose touch with their pension savings when they move house, but it can also happen for other more complex reasons and ironically, those who try to take their pension fund with them from one employer to another may find they are affected. This can happen, says Cracknell, where a person has transferred their savings from a defined benefit scheme that had contracted out of the State Additional Pension (formerly SERPS) to another scheme that does not accept transfers of these contracted out pension rights. Under these circumstances, part of the saver’s pension will stay put while the rest is transferred, creating a stranded fund they may not be aware of.
Unclaimed assets and ways to trace them:
Bank Accounts – www.mylostaccount.org.uk
Life Assurance Policies - www.uar.co.uk/benefit.htm (£25 charge)
Shares and Dividends – www.uar.co.uk/benefit.htm (£25 charge)
Premium Bonds and NS&I accounts – www.nsandi.com/help/tracing_service
Trust-Based Occupational Pensions - https://www.gov.uk/find-lost-pension
Contract-based pension schemes and personal pensions - www.uar.co.uk/benefit.htm (£25 charge)
She also argues that changes due in 2016 will make it harder in future for some people to track down occupational pension savings. This is because the National Insurance Contributions Office will no longer keep records of people’s national insurance when contracting out of the State Additional Pension. These records can provide an important clue as to what type of pension an individual was saving into and therefore where they should go in order to try to trace it.
“It’s pretty hard to trace your pension,” says Cracknell, “but it’s going to get harder.”
Planned government reforms – dubbed ‘Pot Follows Member’ – should help to alleviate the problem in future by enabling people to ensure that their pension fund follows them from one employer to the next. Something certainly needs to change – on the government’s estimates, automatic enrolment of employees into pension schemes will help to get many more people saving for their old age, but without efforts to consolidate their savings through their working lives, it could also create up to 50 million dormant pension pots by 2050.