Brits lose £300 from their pension each year – here’s how to avoid it
The average worker will have 11 different jobs over the course of their lifetime. Each one will come with a new pension pot and its own administration charges
SAVERS could be losing up to £300 from their pension each year due to frequent job moves, a study has warned.
This is due to auto-enrolment, a scheme which started in 2012 and means UK employers are obliged to enrol their staff into a pension unless they opt out.
But according to Hargreaves Lansdown, Brits could be losing out hundreds of pounds as a result.
That's because the average worker will change jobs 11 times over the course of his life.
Each job comes with a new pension pot and its own administration costs of between £20 to £80, according to the report.
More than £600 million across the UK is being lost each year to these charges which could be eradicated by simply consolidating pensions, according to Hargreaves Lansdown.
How to consolidate your pension pots and find the ones you've lost
HERE are some tips
- Try to avoid having more pension pots than you need - When you change jobs, either transfer your old pension across to your new employer’s scheme, or see if your new employer is willing to make contributions to your existing pension so you can keep that one going.
If you are looking at transferring, then always check first whether you’ll pay any penalties or might be giving up any valuable guarantees. - Keep track of where your money is invested in your pension - Don’t assume the default fund you were put into is the best one for you.
It is always worth taking the time to see if your savings could be working harder for you elsewhere.
You may be able to save money on charges or get a better investment return. - Always notify pension companies if you move house - it's very easy to lose track if they don’t know where to find you anymore
- Use the government’s pension tracing service - Check for any pensions you may have
- Go through your old paperwork: Most pensions schemes will send you an annual statement that will tell you the balance of the pension at the time of the statement and a projection of what income it might generate when you reach retirement age.
Once you found the right document, you can contact the pension provider to update your details. - Contact your old employers: You can find template letters for contacting an old employer about a lost pension on the .
The report said: "If we forced employees to change their bank every time they changed jobs there would be an outcry, yet this is what auto-enrolment does with their pensions.”
So, is there a way to consolidate your pensions?
Tom McPhaild, head of policy at Hargreaves Lansdown, told the Sun Online: "Try to avoid having more pension pots than you need.
"When you change jobs, either transfer your old pension across to your new employer’s scheme, or see if your new employer is willing to make contributions to your existing pension so you can keep that one going.
"If you are looking at transferring, then always check first whether you’ll pay any penalties or might be giving up any valuable guarantees."
A separate report from Scottish Widow revealed almost 2 million workers in the UK are not being auto-enrolled because their earnings come from multiple jobs.
More about pensions
Automatic enrolment started in 2012, to head off fears of a looming old age savings crisis.
Employees taking part get the benefit of pension contributions from their employer. Workers can choose to opt out of the scheme.
Government figures show over 9.6 million workers have been automatically enrolled and over 1.2 million employers have met their automatic enrolment duties so far.
The Government has been reviewing various ways to build on the initial success of automatic enrolment.
What is pension auto-enrolment and how does it work?
HERE's what you need to know
- What is pension auto-enrolment? Since October 2012, employers have had to enrol their staff into workplace pensionschemes as part of a government initiative to get people to save more for retirement.
- When does auto-enrolment apply? You will be automatically enrolled into your work's pension scheme if you meet the following criteria:
- You aren't already in a qualifying workplace scheme.
- You are aged at least 22.
- You are below state pension age.
- You earn more than £10,000 a year in 2018/19.
-You work in the UK. - How much do I contribute? There are minimum contributions that you and your employer must pay.
Minimum contributions are being gradually increased over time.Your minimum contribution applies to anything you earn over £6,032 up to a limit of £46,350 (in the tax year 2018/19). This includes overtime and bonus payments.
- What if I have more than one job?For people with more than one job, each job is treated separately for automatic enrolment purposes. You can still opt out of individual schemes if you want.
Each of your employers will check whether you’re eligible to join their pension scheme. If you are, then you’ll be automatically enrolled in that employer’s workplace pension scheme.
"By removing the lower earnings limit - making every pound pensionable - we will increase contributions and incentives for lower earners and people with multiple jobs to opt in, benefiting from an employer contribution and tax relief."
The auto enrolment minimum is currently 5 per cent of qualifying earnings of which at least 2 per cent must be paid by the employer and 3 per cent by the employee.
In April next year, it will rise again to 8 per cent of qualifying earnings of which at least 3 per cent must be paid by the company and five per cent by the saver.
Pensions are complicated to get your head around, with one in five working Brits facing retirement poverty because they have failed to save - here is how to keep on top of your pension savings.
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