UK faces ‘lost pension crisis’ and increasing gender divide

As the population benefits from increasingly flexible career paths – often taking people across the country, if not across the world – pensions are becoming accumulated in smaller, disparate pots more than ever before.

Now, new research suggests that around a quarter of people aged over 55 have either four or more pension pots.

Whilst this not be a cause of concern in itself (although multiple, smaller pension pots do not have the investment power or capacity for interest like one large pension pot), about a third of the people interviewed in the Now Pensions survey noted they didn’t know where all their pension pots were.

This is dramatically more worryingly, with currently estimates stating that over a million pensions worth around GBP 3 billion are abandoned in dormant accounts.

By 2050, experts predict this will grow to GBP 750 billion in dormant pensions – heralding a ‘lost pensions crisis.’

The gender divide

What’s more, new research suggests whilst 49% of men are adequately preparing for their retirement – only 40% of women are.

For the women who are saving, they are parting with an average of GBP 182 each month, which is GBP 78 less than men, creating a gender pensions gap of almost GBP 1,000 each year.

The ninth edition of the Scottish Widows UK Pensions Report also showed 37% of women have no pension at all.

Reasons stipulated for this trend included increasing financial barriers and familial circumstances, such as short-term financial gaps whilst younger and the cost of supporting elderly children and grandchildren later in life.

This is worrying because, on average, women outlive their partners. What’s more, when it comes to annuities and certain other pension plans, sometimes when the husband dies, his pension plan is not transferred to the surviving spouse – it “dies” with him.

Taking care of your future

Talking about the lack of knowledge for female pension holders, Lynn Graves, Head of Business Development for Corporate Pensions from Scottish Widows, notes “we should encourage these individuals to take full responsibility for their financial independence.”

“Knowing what you are entitled to allows you to make informed choices and gives you a back-up plan.”

As Graves asserts, knowledge is power, and no less when it comes to pensions.

If you have accumulated pensions in the UK, and believe you have ‘lost’ the details relating to one of your schemes, the first step is to contact the Pension Tracing Service – a free service provided by the UK Government.

They will help you track any lost pensions so you can gain a better understanding of your financial future in retirement.

If you have multiple, smaller pensions, you may want to consider consolidating them into one pension plan. This does not only make pension arrangements easier to manage, but allows for greater investment power, due to the increased totals, and therefore the chance to increase your pot by larger percentages.

The investment vehicles which allow this are called SIPPs, or, for individuals with UK pensions who are living abroad, QROPS.

An independent financial advisor can discuss these options with you in more detail, and highlight which option is the best for your unique circumstances and needs.

In addition, a financial advisor can advise an individual on their spouse’s pension, outlining whether the plan will be passed on in case of death, how much of the plan might be passed on, and how much income both parties can expect to derive from the plan.

To be put in touch with an independent financial advisor, please use our contact form.

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