Pension minister Steve Webb is continuing his assault on financial firms by looking at ways to unlock billions of pounds they hold because they have lost track of the retirement savers who have a right to the money.
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Webb has already joined with Chancellor George Osborne in a radical overhaul of the pension industry that has seen the market for costly, low-return annuities decimated and new early-access rules that allow savers to spend their pension funds when and how they like.
The minister claims 10,000 widows entitled to money from the pensions of their former husbands may be facing financial problems because they do not know about the cash.
He plans to make the government’s ‘Tell Us Once’ service more widely available, so spouses and relatives of a deceased person can inform all government departments about the death of a loved one with just one call or email message.
£3 billion unclaimed
The data would also go to financial firms who may hold cash in bank accounts, pensions or investments.
“Financial firms are earning money from these lost funds that belong to someone else,” said Webb.
“It’s already known that people lose track of money in pensions when they change jobs and these orphaned funds are just sitting there waiting for someone to claim them.
“I want to make sure that spouses are reunited with the money that belongs to them.”
Pension firms reckon around £3 billion is held in unclaimed accounts – and the money earned from the investment is going to the fund managers.
Webb’s concerns are not completely benign. Behind his thinking is the state may be funding benefit claimants who may not need to claim the cash if they had access to the lost pensions.
According to government figures, around 5 million people have lost contact with workplace pensions.
The Pensions Tracing Service, a government agency, picks up 100,000 calls a year from retirement savers concerned about their lost funds – and one in 10 are calls from widows.
A study by charity Age UK found nearly a quarter of adults have lost track of at least one pension.
While 20% blame lost paperwork as the main reason for losing contact with their pension provider, around 50% have given up trying to find the cash and confess they have no idea how to find the missing money.
Younger savers are more likely to have mislaid a pension, with 37% of under-45s losing their savings.
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