Worrying new research from Capita Employee Benefits has shown just how little workers are engaging with their defined contribution pension schemes. More than one in four members have no idea how much their funds are worth, while 23 per cent never check how their pension is doing. More than half have no idea how much they should be putting away to ensure they have a comfortable retirement.
It is no surprise, then, that the number of workers who lose track of their pensions altogether is on the rise. The Department for Work and Pensions has estimated that there could be 50 million dormant pension pots by 2050.
However, all is not lost if you think a pension may have gone missing. If you know (or can find) the name and address of the employer or pension scheme involved, simply write to them directly, giving any details you can of your employment. Otherwise, the DWP's pension tracing service will try to locate the current whereabouts
The DWP recently reported that its service helped more than 126,000 people recover forgotten pots in the last year. However, going down this route is no guarantee of success. Around 12 per cent of searches, relating to 17,265 pots, drew a blank last year, and the service only provides the name of the pension scheme administrator - the onus is on you to make further enquiries.
If the tracing service cannot help, you can contact the Pensions Advisory Service, which describes itself as "very experienced" in finding lost pensions.
Herald reader Jim Bruce from Edinburgh recently decided he might as well find out whether he or his wife had any lost pensions from three employments, the latest of which ended in 1981. So he contacted the Pensions Tracing Service which sent out forms. He said: "The form is straightforward, though I couldn't remember whether I had even paid into a pension let alone when I may have joined a scheme, but it didn't seem to matter too much." One of his three inquiries produced a direction to the wrong local authority pension scheme, one failed to identify a previous employer despite what appeared to be a correct address, but the third hit the jackpot. Mr Bruce, 63, who already has a number of small pensions, said: "When I opened the envelope and found it was from an actual pension scheme stating my entitlement, I expected it would be next to nothing. It seems I will now be getting £1,397 a year, money which I had no idea I was entitled to, and nobody would ever have told me was mine."
He went on: "I only spent two and a half years in that employment, and I thought that if there was anything lying there it would probably have disappeared in charges and so on by now.
"I regard myself as reasonably financially aware, but I had completely overlooked this, so I would guess that a lot of money is lying unclaimed by people who probably need it."
The DWP forecast of an explosion in dormant pensions points towards a potential "zombie pension" scandal of the future, fuelled by the apathy of many workers who are now being automatically enrolled into schemes for the first time.
Now, industry experts are calling for a major education drive to help people keep in touch with their pensions.
Louise Harris, head of client communications at Capita, said: "If we're to create a nation of savers, it's absolutely crucial people are engaged in pensions, understanding how much they have and need, so they can adapt their contributions and choose where they invest, while regularly checking to see they are on track."
Furthermore, Ms Harris warned that the current low opt-out rate for workplace pensions may creep up unless employers "provide good quality, clear communication and guidance about pensions throughout an employees' working life". She said issuing warnings when people are about to stop work "is a case of too little guidance, too late".
The government is all too aware that workers may be building up lots of small pots as they move from job to job - only to forget all about them. Pensions minister Steve Webb has promised to introduce a pot follows member policy, where schemes worth less than £10,000 automatically move with the employer throughout their working life. Mr Webb recently said: "Soon it will be the norm that when you move job your small pension pot moves with you. This will reduce the costs of providing pensions and help people to plan for their future."
Tom McPhail, head of pensions research at Hargreaves Lansdown, said: "Whenever you change jobs, look at whether there is scope to consolidate your pensions, for example by transferring from your old employer's scheme to your new one."
It is also possible now to find a service offering to keep your investments and pensions all in one place.