By Andy Davies, Financial Institutions Relationship Manager at Estatetrace
Pensions Tracing Day and the Scale of the Problem
It’s Pensions Tracing Day on 26 October. I know this because one of my colleagues was sent an email from their provider urging them to reconnect with their various pensions from over the years.
There are an estimated £31.1 billion worth of lost pension pots in the UK. These are generally pensions where the customer has reached retirement age and it has not been claimed. The industry even has a term: ‘Suspense Payments’, where a customer has reached retirement age and their pension is sitting on the books just waiting to be paid out.
However, the problem is likely far wider than these figures suggest, as they don’t account for those who have not yet reached retirement age and have lost track of their assets, unbeknownst to their provider. In our own consumer survey two years ago, we identified that 30% of people can’t easily locate or don’t know the whereabouts of their personal pensions. I will leave you to do the maths.
Therefore, we must welcome any and every initiative to help people trace the whereabouts of their pensions, so that they can claim what is rightfully theirs and benefit fully from all of their efforts to save for a well-earned retirement.
Why Consumers Struggle with Pensions Tracing
The challenge is that consumers don’t know what they don’t know. The Government Pension Tracing Service is helpful if consumers can provide the name and date of former employers and can supply the contact details of the provider who is responsible for the pension now. It is useful given the degree of mergers and acquisitions over the years, which is one reason why pensions can be so difficult to locate.
Pension providers and policyholders are also subject to an employer’s diligence in supplying employees’ details to providers when opening a pension. Those in the industry know that often an address is incorrect or not supplied by an employer. If pension providers don’t hold comprehensive customer data, they cannot, and will not be able to, make relevant matches.
Data Gaps and Lost Pensions
The fact that they may only have partial data – such as an outdated address – likely increases the probability that they will lose touch with the policyholder. The result is that it can be very difficult for both pension providers and customers to reconnect.
Auto-enrolment, while a great initiative to support people through the totality of their lives, has exacerbated the missing pensions problem. Particularly, for those who have only spent a short time in various jobs. The good news is that the Small Pots Working Group has been created to address this challenge, and they have some interesting ideas.
Pensions Tracing Services and Data Security
There are also other consumer-facing search services to help track down lost pensions. Some of these enable registration of previous home addresses so records can be matched. These rely on the third-party provider holding mass customer data from multiple pension providers in order for a consumer to search and match. However, rightly so, pension providers are protective of customer data. In an age where cybersecurity is of utmost importance, the principle of least privilege applies, and a reduction in suppliers holding mass customer data provides a tangible improvement to data security.
Therefore, so often, these solutions may not provide the comprehensive level of search a consumer is looking for as data is not made available. Consumers need to wait for their relevant Providers to join, Providers need to wait for their relevant Consumers to join, which may or may not happen.
Why Pensions Tracing Matters During Major Life Events
While this may or may not reunite customers with a pension at some point in the future, often the reason people are searching for their pensions is due to a major life change in the present. They may be about to retire and want to purchase an annuity, or their representative may be searching to organise care requirements, or following a death, and so need a quicker solution to identify what’s available.
The Pensions Dashboard and the Future of Tracing
The Government is well aware of the multiple challenges surrounding lost pension pots and is in the process of setting up a Pensions Dashboard, which will interact with the pensions finder service. Pension companies have been instructed to be ready to connect with the dashboard for an anticipated launch date of 31 October 2026. While brilliant and welcomed, much like the HS2 rail scheme, it’s proving a challenge to implement, and the launch date has already been pushed out three years from 1 August 2023. However, I remain hopeful it will ultimately provide a good way forward.
How Estatetrace and Estatesearch Help Reconnect Lost Pensions
At Estatesearch and Estatetrace, we offer several alternative approaches enabling people to reconnect with assets such as pensions more immediately. Estatesearch offers a comprehensive Financial Profile Search, which includes pensions and wider asset types, enabling legal representatives to track down assets during probate. Estatesearch also offers a Living Asset Search, which can be ordered through a financial advisor.
On the other side of the coin, at Estatetrace we work directly with financial institutions, including pension providers, to help them reconnect with customers through our enhanced pensions tracing services. Often, with partial or incorrect information, this will be the only way to rectify issues, as matching simply won’t work. I’d encourage providers to engage in this activity well before the deployment of the Pension Finder Service, which will likely lead to a deluge of partial match information, and create a resource bottleneck for Customer Services while they try to work out which matches are legitimate.
Demonstrating Due Diligence Through Tracing Activity
While we have a high discovery rate to find disengaged and gone away customers, we are also able to support financial institutions to demonstrate that they have made all reasonable endeavours to trace a customer and repatriate them with their assets and pensions. This means funds can be transferred to initiatives like the Dormant Assets Scheme if this is appropriate, or their own nominated charity, or archived on their systems. Importantly for pensions providers, this means they can reduce their held liabilities, and manage cash more wisely.
A Brighter Future for Pensions Tracing
According to research from the Pensions Policy Institute (PPI), the total value of unclaimed pension pots in the UK has risen by approximately 60% since 2018, reaching £31.1 billion as of October 2024. Currently, the issue is clearly growing. However, I hope with the introduction of new consumer-facing services, including the Pensions Dashboard and the efforts of the Small Pots Working Group, there is a brighter future ahead.
And, at Estatesearch and Estatetrace, we will continue to do everything we can to help reconnect customers with their pensions so they can enjoy the retirement they deserve.
Happy Pensions Tracing Day!