By Maximilian Clarke
Britain’s workers are struggling to manage their pensions savings because they are scattered across numerous employers in small workplace pension pots, new research from Aviva shows.
Almost half of workers surveyed said they had multiple pots, with one in two unclear of the overall value of their pension savings, but 75% still felt they would not have enough to live comfortably in retirement.
Two in three people said it was important or very important to see all their pension savings in one place, 64% were in favour of consolidating their various pots into one "big fat pot", and of those 96% said that they would be much more likely to do this if there was a simple system in place to do it.
The research suggests that employees’ lack of clarity on their pension savings makes it harder to assess whether they are putting enough savings aside for their retirement.
A third said they were concerned about how they would manage their separate pots across their careers.
Pensions Minister, Steve Webb has spoken about helping workers pull their small “stranded” pension pots together, making it simpler and more cost effective for individuals and pension providers to manage. The Department for Work and Pensions (DWP) has also indicated that it will consult on options for transferring pension pots between auto-enrolled schemes.
Of those surveyed just over half had a workplace pension, in line with the UK average, with 43% having between two and four small pension pots and 6% having five or more. On average, employees tended to stay with an employer for four and a half years.
“What’s clear from this research is that many workers in the UK are saying they want to be able to easily manage their retirement savings and to see the value of their total pension pot in one place,” said Paul Goodwin, director of workplace pensions at Aviva.
“There is a constant drumbeat about people not saving for retirement, which is valid. However, when you cannot track your savings in a simple way, it’s very hard to know how much more you actually need for your retirement.
“With auto-enrolment being introduced from next year we have even more opportunity to encourage employees to actively save into a pension. However, we also need to recognise that those employees benefiting most from auto-enrolment, largely those on lower salaries, may also be left with a number of small pots.
“A simple solution for those in auto-enrolled schemes would be to allow automatic transfers between similar auto-enrolled schemes so that an employee’s pension follows them as they move jobs.”
Employees currently concerned about what to do with their disparate pensions pots should seek financial advice before they decide whether to consolidate their pots in order to assess whether it will be benefit to them to do so. Encouragingly, a total of 72% of those asked said they would seek independent financial advice before making a decision.
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