Pension pile scoop could give savers an extra £20.000

IF YOU’VE changed jobs a few times in your career, there’s a good chance you’ve left behind a few forgotten pensions. Since automatic enrolment was introduced in 2012, millions of workers have been placed into workplace pension schemes.

- By Harvey Jones

Every time you switch jobs, you may be starting a new pension pot, potentially leaving a trail of small pensions across different providers.

And while those pots may be small individually, collectively they're becoming a big headache, for both savers and the pensions industry.

In fact, many people don’t even realise how much money they’ve got squirrelled away in forgotten accounts. But now could be the perfect time to do some financial housekeeping, because the government is stepping in to help.

Last week the Department for Work and Pensions (DWP) confirmed plans for a new system to tackle the proliferation of small pension pots, defined as those worth less than £1,000. The idea is simple: these orphaned pots will be automatically consolidated into a small number of “default consolidator” schemes to improve transparency, cut costs and boost engagement.

SMALL

There are already around 13 million small, deferred pots in existence. Without reform, the DWP warns that the number of small pots could swell by another million or so every year.

Many workers could easily end up with a dozen or so pension pots across their career. These pensions often have balances too small to be transferred easily or cost-effectively.

Many people weren’t engaged with their pension pot in the first place, making it even easier for the money to go astray.