Scattered pension pots are making financial planning a difficult task for thousands of savers.
New research reveals that more than half of workers have at least two pensions, according to Now: pensions.
Surprisingly, 8% of all savers have four or more pensions, and for those over 51 years old, the percentage rises to a quarter of all savers.
Another one in three workers think they have a pension but have no idea who is running their fund or how to access their account.
The survey was in response to pension minister Steve Webb’s decision to set up a system to let retirement savers migrate their pensions into a single fund as they moved jobs rather than abandon them.
Pension consolidation
The study revealed this idea is popular with half of retirement savers who will take up the offer to consolidate their small funds into one easy to manage pension, while nearly 40% are keen to keep their pensions when they swap jobs rather than set up a series of new accounts.
The research also disclosed:
- 81% would worry if their pension was transferred to a scheme that failed to perform as well as the old one.
- 86% would be concerned if their pension pot was automatically moved into a scheme where the charges were higher.
- 89% of over 55s would be concerned if their pension pot followed them to a higher charging scheme.
Morten Nilsson CEO of Now: Pensions, said: “Workplace pensions generally work out the best funds because employers make extra contributions and the pension often offers extra benefits that would cost more to replace in a private scheme.
“Even if the job does not work out and people end up leaving after a short time, a workplace pension is generally the best option.
Saving safeguards
“It’s also clear that it’s better to start saving a small amount as soon as possible rather than delay and play catch-up. That way, pension savers have a greater chance of funding a more comfortable retirement.”
Nilsson also explained that auto-enrolment is likely to lead to an increasing number of small pot pensions as workers move between jobs.
“The risk is these small pots can diminish quickly because of charges, and it is often better to consolidate into one larger fund,” he said.
“Providing the government decides to put the right precautions in place to calm the fears of poor performance and high charges when moving schemes, automatically transferring pensions seems a good idea.”
