24 Jul 2019
The Office for National Statistics (ONS) released its annual survey of occupational pension schemes in June 2019 and this identified some interesting trends in relation to Workplace Pensions. One of the key statistics that instantly jumped out at me, was a surge in the number of dormant pensions in recent years.
Since auto enrolment was introduced, the number of active members (i.e. those contributing to a private sector pension) has more than doubled from 7.8 million in 2012 to 17.3 million in 2018. This is good news and an indication of how successful the government’s pension reforms have been; however, it also poses a problem in that it has created an increase in small dormant pension pots as people move jobs, which happens far more often than previous generations, and with each new job comes a new pension. But what are people doing with their previous pension funds? For many, it appears the answer is nothing!
To be more specific, the ONS Survey showed there were 18 million dormant pensions in 2018, up from 15.8 million in 2017 – these being ‘old’ workplace pensions to which contributions have ceased. The increasing number of small pension pots is making it harder for millions of savers to manage their money and understand what they will receive when they get to retirement; meaning a vast number of people may be set for disappointment when they do.
It’s concerning that, according to estimates by the Department for Work and Pensions, up to 50 million pension pots will be lost by 2050 without a vehicle to help workers keep track of savings through their careers. Although insurance providers make considerable efforts and spend millions every year trying to reunite people with lost or forgotten pensions, providers are unable to keep pace with a mobile workforce that moves jobs and homes more often than ever before.
This illustrates a need for the Pension’s Dashboard more than ever (something highlighted by my colleague Richard Grover in his opinion piece in April 2019) enabling people to see all their pension savings, including the State Pension, together in a single online area. Until that time, it makes sense for savers to be more proactive when it comes to their pensions. Some clear guidance to an employee from a qualified professional may mean the difference between that person understanding the value of their ‘old’ pension in the context of their overall pension picture and possibly transferring this into their new plan, or them potentially losing track of it completely.
At Wingate we have designed a pension engagement service for employers to try and de-jargonise pensions for employees, with a view to getting staff engaged with pensions and planning their futures. If you are looking to understand how pension education can help increase employee appreciation of your pension arrangement, then please feel free to contact us at:
@: email@example.com or t: 01883 332260