The Department for Work and Pensions has launched a new website for the government's pension tracing service, as the number of people seeking their deferred pots has ballooned over the past decade.
Many people are unaware how much money they have saved across numerous pension pots, and some schemes are in a similar position. In 2014, the Plumbing and Mechanical Services Industry Pension Scheme took steps to improve its scheme data after it discovered information was missing for almost one in every five members.
The DWP’s tracing service helps people to locate lost pension pots, an increasingly important function as workers are now changing jobs more often during the course of their careers.
If you can track deferred members it helps to fine-tune the liabilities of the scheme
Fergus Clarke, PASA
The DWP estimated there was roughly £400m in unclaimed pension savings in the UK.
Efforts to claim lost pots have increased around 440 per cent over the past decade according to the DWP, reaching 169,000 in 2015-16 from just 33,077 in 2005-06. The 2015-16 figure includes digital requests from trialling the new website, however.
Source: DWP
This increase has largely matched the growth of awareness of the pension tracing service through referrals from the Citizens Advice Bureau and references on the Pension Wise website, as well as the service being hosted on the GOV.UK website.
A spokesperson for the DWP said: “Our pension reforms actively encourage people to take control of their savings when planning their retirement. Pension tracing requests have increased by a third over the last year and we expect this demand to continue to increase now that the service is fully digitised.”
Pension tracing increases among schemes
The increases have not been confined to individuals. Fergus Clarke, board member at the Pensions Administration Standards Association, said schemes are increasingly looking to clean up the data they hold.
“There’s a significant increase in the activity trustees and administrators are undertaking. If you can track deferred members it helps to fine-tune the liabilities of the scheme.”
“In the private sector there’s been a lot of this work. Many of the large funds and providers provide it as part [of their offerings].”
Clarke said the use of mortality screens had grown alongside tracing, as schemes prevent overpaying by using public records to validate whether a pensioner is still alive.
He added: “We would actively encourage schemes and administrators to up their game and adopt best practice to make sure they trace and that admin records are up to date.”
Freedom and choice
Clarke said he was “not sure there’s a direct correlation between freedom and choice and tracing”, attributing the growth instead to growing desire for high governance standards.
But Tom Nimmo, business development manager at data specialist Veratta, said the increased flexibility would lead to an increase in tracing.
“Freedom and choice is putting the power back into members’ hands,” he said. “That will encourage them to ensure all the various pension pots and entitlements are known to them.”
Other drivers, he said, are the growth of technology, which will play an ever larger role in keeping member records up to date, and the increasing tendency of people to change jobs many times throughout their working lives.
Schemes will typically look to carry out a tracing exercise as a matter of necessity; individuals will be pushed by education around the benefits of doing so, Nimmo said.
“Most schemes that come to us have reached a point where an exercise or event has come up that means a reconciliation exercise is critical,” he said. “Typically a big event pushes members to have to take it into account. It tends to be part of a wider exercise.”
He continued: “Schemes and administrators tend to have a better idea of what’s involved. For members a big part of it is the communication piece.”
