Changing jobs and moving house are stressful enough situations for savers, but too often in these cases they forget to inform their pension providers, the Pension Policy Institute (PPI) has found.
This leads to people losing track of their pots and schemes are unable to get in touch with the member.
The PPI revealed that between 2018 and 2022, the value of lost pensions grew to £26.6bn ($30.2bn, €30.5bn) from £19.4bn, with the average value at around £9,470.
In the same period, the number of lost pots rose by 75% to 2.8 million.
Hargreaves Lansdown said that losing track of one or more pensions can have a “significant impact on retirement decision making”.
For those who ‘lost’ a pot, the UK government’s Pension Tracing Service can help tracking it down. According to a Freedom of Information request by the investment platform, the service took over 232,000 calls between April 2017 and August 2020.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “The number of lost pensions is growing at an alarming rate and risks undermining our retirement planning.
“We are more likely to change jobs several times during our careers and auto-enrolment means you could have a pension for each one. Not updating your contact details for these pensions when you move to a new house means it is easy for pensions to go astray and you won’t have a full idea of what you have.
“The pandemic has acted as an accelerant to the trend, with more people shifting jobs and we now have an estimated £26.6bn in lost pension money in the system. The average amount in lost pensions is just over £9,400 – this may not sound like a lot but over time investment growth can add up to a tidy sum and if you lose track of more than one pension, it can have a major impact on retirement planning decisions.
“Finding a lost pension could be the difference between struggling to make ends meet or being a bit more comfortable in retirement. It might mean you can afford to go part-time in the years before retirement or need to stay in work for longer, so it’s vitally important to keep your contact details for your pensions up to date.”
Tom Selby, head of retirement policy at AJ Bell, added: “The success of automatic enrolment in getting millions of people saving something for retirement, many for the first time, has exacerbated the problem of ‘lost’ pension pots.
“The combination of people switching jobs regularly – around 11 times over the course of a lifetime according to some estimates – and auto-enrolment is creating a vast and hugely valuable sea of retirement money that has become disconnected from its owners.
“The pandemic is likely to have spurred an acceleration in career moves over the last four years, driving a £7.2bn surge in the estimated value of lost pensions.
“There is also some evidence that more people have been moving house since 2018, with the proportion of people having lived in the same house for more than 30 years dropping from 16.6% to 13.1% during that period. Moving house is another key reason why people lose touch with their pensions.
“The average value of lost pensions has dropped since 2018, in part because we are likely seeing more lower value pots going missing. Despite this, the average lost pension is still estimated to be worth well over £9,000 – not the sort of money you would normally find down the back of the sofa.
“Ensuring pensions are easy to track and combine is absolutely crucial if we are to ensure more people make the most of their hard-earned retirement pot. Pensions Dashboards, which will eventually allow savers to see all their pensions in one place, online, represent an important next step in addressing this challenge.”