The Irish Association of Pension Funds (IAPF) estimates that there are €500 million worth of unclaimed pensions in Ireland
While recently helping a client draw down their pension benefits at retirement we discovered the client had six different pension policies in total (four they were aware of and two they had totally forgotten about).
The person in question had changed employment numerous times during their working life and weren’t aware of the pensions they had left behind in some cases.
With the economy picking up again, the workforce is now more mobile, the idea of a “job for life” is a thing of the past, it’s now quite common for people to move jobs numerous times throughout the course of their career. This can create its own problems when it comes to pensions, it can often be difficult to locate exactly where various bits of pension savings are – and this issue is further exacerbated for those who have lived and worked abroad.
These forgotten or misplaced pension funds can result in people missing out on pension savings that could make a big difference to their standard of living. The Irish Association of Pension Funds (IAPF) estimates that there are €500 million worth of unclaimed pensions in Ireland. Other estimates put the value as high as €1 billion!
One of the most common mistakes people make is believing that tracing a pension from a previous employer is simply not worth the effort
The UK has a national pension tracing scheme however no such scheme exists in Ireland yet. In response to a Dail question in Feb 2019 Minister Regina Doherty indicated her department are currently working on setting up a scheme for when “the administrator of a pension scheme or a life company is unable to trace a member using their own resources they can use the Department of Social Protections resources”.
One of the most common mistakes people make is believing that tracing a pension from a previous employer is simply not worth the effort. This can often be a costly mistake to make. If you and your employer have paid into a pension for even just a few years, depending on when that pension was started, significant sums may have accrued over the years.
What should you do in relation to your own pension policies to ensure you don't lose out on any pension savings accumulated over your working life?
It is almost always in your best interest to join an employer's pension scheme as the employer will be paying into it. Once you have been in it for two years, you have a legal entitlement to the value of it. Whether or not you see yourself remaining with that particular employer until retirement age does not mean you can't benefit.
Try to hold on to some of the pension documentation from previous employers, this will have contact details of the trustees should you need to trace your pension in the future.
Make sure whoever administers a pension scheme in which you have been a member has your up-to-date address. Keep a list of companies to notify when you move. Also try to make sure these companies have contact details that are unlikely to change, such as personal email addresses or mobile numbers. Once your pension is due to be paid, the trustees have a legal duty to pay it and will make some efforts to find you.
However, that will be difficult if you have moved from the address that they have on file for you – and it will be even more difficult if you are living abroad.
While you are still employed, you get an annual statement setting out your benefits and the main contact details for the scheme. However, once you leave that employer, you no longer automatically receive that information. You can ask for updates on your pension from the pension scheme administrator and they are obliged to provide these to you. You should do this at regular stages to help plan for retirement.
You have the right to transfer any past pension benefits you have into your current pension. You can also convert the value of your former employer's pension into what's called a Buy-out Bond. This will give you more control over how and where the value of your pension is invested so that it better reflects your appetite for investment risk and reward. It may not always make financial sense to transfer or consolidate a pension and it is important to seek independent financial advice before doing so.
If you are having difficulty working out where your pension is, contact former colleagues, the regulator or the Pensions Authority.
It is ultimately the responsibility of each individual employee to keep track of what they are entitled to, a few simple measures taken now may eliminate a lot of additional stress when it comes to retirement age.
* Barry Kerr CFP® is Managing Director of Wealthwise Financial Planning who have offices in Carrick on Shannon & Galway, www.wealthwise.ie All details and views contained within this article are for informational purposes only and does not constitute advice. Wealthwise Financial Planning makes no representations as to the accuracy, completeness or suitability of any information and will not be liable for any errors, omissions or any losses arising from its use. Wealthwise Financial Ltd T/A Wealthwise Financial Planning is Regulated by the central Bank of Ireland #CI66141