It has now become the norm for people to move jobs numerous times throughout the course of their career, the idea of a ‘job for life’ is a thing of the past.
The reality for many will be that by the time they reach retirement they may have had five to ten different employers.
As a result of this, it can often be difficult to locate exactly where various bits of your 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 coming to retirement and missing out on pension savings that could make a big difference to their standard of living.
The office of the Financial Services & Pensions Ombudsman said thousands of people who moved jobs years ago are now finding it difficult to trace their retirement benefits.
People may have moved jobs a number of times and those who have worked abroad may also have misplaced pensions.
It is estimated that up to €500m worth of pensions currently remain unclaimed. Although the Irish Association of Pension Funds (IAPF) estimate this figure could be closer to €1 billion.
One of the most common mistakes people make is believing that tracing a pension from a previous employer is simply not a 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.
Here are some steps you can take 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 is the Founder & Managing Director of Wealthwise Financial Planning who have offices in Carrick-on-Shannon, Co Leitrim & Oranmore Co Galway. 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 #CI6614. www.wealthwise.ie email@example.com