Even the most diligent person can lose track of things from time to time. I’m sure most of you have forgotten to note a meeting in your diary, or spent a stressful morning attempting to locate your car keys (inevitably between the cushions on the sofa).
The same can be true of pensions. Working patterns are increasingly transient in the UK, with the average employee switching jobs eleven times during their career. And if you sign up to a pension with each of your employers, you could well end up having several different savings pots in a number of different places.
Ideally everyone would consolidate their pensions with a single provider, but many people simply don’t have the time or inclination to do this, despite the often significant sums of money involved. Some pensions also come with exit fees, while others have valuable guarantees attached which you could lose if you physically transfer the money to another provider.
Not knowing how much money you’ve got saved and with whom makes it extremely difficult to plan for your retirement, while some lost pensions are simply never found. The Department for Work and Pensions estimates £400m of “lost” pensions are currently sat in accounts and unclaimed.
In a bid to address this problem, the Government and a group of eleven pension providers are developing a ‘Pensions Dashboard’. The aim of the project is simple – to enable you to see all of your various pension pots in one place, online.
What will you be able to see?
There are various different types of pension you can build up during your lifetime which you should be able to view via the Dashboard. The Government has said the state pension will be included, which seems sensible since this is the foundation upon which private savings are built.
Most private pensions will also come into the scope of the Dashboard. Automatic enrolment reforms being gradually introduced up until 2019 mean all employers will be required to offer staff a workplace pension, with the employer eventually paying in a minimum of 3% of salary and the employee 4%. If you’ve built up a savings pot through auto-enrolment, you’ll be able to see it on the dashboard.
And while the Government has, as yet, resisted the temptation to force all pension companies to provide the information necessary to make the Dashboard a reality, most modern platforms and self invested personal pension (SIPP) providers should have no problem linking their technology to the initiative.
However, if you have an older-style pension it’s possible it is now administered by a ‘closed-book’ firm – essentially a large company that buys up old pension policies, but doesn’t sell any new ones. These firms tend to operate on outdated technology systems and so may struggle to accommodate the Dashboard. If this is the case, the Government may introduce legislation requiring them to make the Dashboard available.
It is also not clear whether defined benefit pensions – which guarantee a set level of retirement income for life, usually based on your final salary – will be included in the reforms.
It’s very much a watching brief on the Pensions Dashboard for now. The project has the potential to make your life a lot easier, but it is only at the planning stage with a prototype to be unveiled in Spring next year and the finished article due to roll out in 2019.
In the meantime, it’s worth checking your old pension documents and, provided you won’t be penalised or lose any guarantees, consider consolidating your pensions with a single provider such as AJ Bell Youinvest.