Dormant account are accounts which haven’t been touched for many years, despite attempts by financial services businesses to get in touch with the owners.
Once an account is identified as being dormant, the money is moved into a central fund which is put towards good causes through the Big Lottery Fund. So far, more than £600m of funding from dormant accounts has gone to towards benefitting people and communities across the UK.
A surprising amount of the population are guilty of losing track of their money in untouched bank accounts. Those bank accounts become dormant and forgotten about, leaving large sums of cash sitting idly. To stop the build-up of unused cash, which will never be touched, the Government introduced a Dormant Assets Scheme, that we'll describe here.
However, in addition to understanding lost pensions or dormant assets, it is always recommended to seek personalised pension advice when it comes to successfully budgeting for your life after you retire.
Again, what are dormant financial assets? As briefly alluded to above, a dormant financial asset is an account with cash that has been untouched. For all intents and purposes, it has been completely forgotten about by the account holder. Assets move to being dormant when they have been left alone entirely for 15 years and the account provider has been unsuccessful in making contact with the account holder. The amount does not come into consideration.
With regards to pensions, lost pensions are similar to dormant financial assets. If a company has been unable to contact or trace the pension holder, the pension becomes dormant. While it seems hard to believe,a huge number of pensions end up forgotten about. Lost pensions are broadly seen as a result of people moving jobs more regularly than they ever did as well as moving home more frequently too. Moving jobs and moving house makes it hard work for pension funds to contact pension holders. Plus, moving jobs also makes it easy for individuals to forget if they were ever enrolled in a pension at a past firm - especially if they have several pensions to keep track of.
What's the Government plan on dormant pensions? Under the Government’s Dormant Assets Scheme, once assets have been defined as dormant, they can then be donated to charities or causes to be put to better use.
The Government’s Dormant Assets Scheme is already in place, but it is being expanded this year after a consultation review that took almost four years. In doing so, pensions and insurance products or policies will be able to be deemed as dormant assets too. The assets or products that can be considered as dormant if left untouched are:
Retirement income policies
Life insurance policies
Shares or units in collective investments
Unclaimed money resulting from corporate action
Unclaimed money from investment asset distributions
The hope is that over £800million will be freed up to donate to charities around the United Kingdom.
Can I reclaim dormant pensions? Crucially, just because a person’s assets have been deemed dormant, does not mean they cannot reclaim them. Even if the cash value has been donated towards a good cause, it is still possible for an individual to come forward to be reimbursed. In fact, the Government direction is that companies must do all they can to find account holders and investors before transferring any proceeds to the Dormant Assets Scheme. While over £1.35bn has already been transferred into the scheme, the fund still keeps hold of 40% of those assets to ensure it can meet any reclaims.
Finally, it is important to remember that this is not a Government directive aimed at raising cash for charities without having to find it elsewhere in the annual UK budget. It is primarily the Government's way of helping to tackle problems with pensions that many of the population have. By putting the onus on companies to reunite individuals with their pensions, it is hoped that around £2bn worth of assets can be given to the rightful owners.
There is no need to be concerned as such about your assets. The Dormant Assets Scheme, as already mentioned, is not a way of taking away ownership of workplace pensions or self-invested personal pensions (these are called personal or private pensions). Instead, the scheme is targeting reuniting pension holders with personal pensions through enhanced tracing procedures, so you do not have to be concerned that you will lose any past pensions.
Instead, what is best to do is to think through your past jobs and companies you have worked at. Try to track down any paperwork you have previously received that mentions a pension such as a defined contribution pension. Alternatively, find any paperwork you can about self-invested personal pensions that you may have started.
Once you have located as many pensions as you can, write it down in one place. Go back to it regularly to ensure that all the information is up to date. Doing so will help you get the best information you can for when you seek pension advice.
I think I'm missing information about a previous job scheme. What can I do? There are a number of ways that you can find missing information regarding any or all of your pensions if you have misplaced your pension statements or you are no longer receiving them. Firstly, if you know the pension provider, try contacting them. Email them with as much information as you can give regarding your plan, but also be ready to provide details such as your National Insurance number and your date of birth, which can really help locate your pension plan. You can also contact your past employer. They should be able to provide you with the details regarding your workplace pension. If you work for a large company that does not remember you, you will find giving them details such as your National Insurance number and employment dates helpful too. The Government's Pension Tracing Service is on hand to help in instances where a pension provider or past employer cannot help. The service has access to a large database of over 200,000 pension schemes (both workplace pensions and personal pensions). You can either phone the service or use their online request form.
I've traced back all my pensions, what now? Now is likely a good time to seek out the benefits of pension advice from a professional. It may be an added expense, but it is often seen that those who do seek pension advice are actually better off in retirement. Make sure you are one of them, by having all your pensions and investments working for you as effectively as possible. The earlier you do this pension planning, the better. You may be recommended to consolidate your pensions into one pot. There is definitely some upside to doing this. Less administration is just one of them, along with the likelihood of fewer fees. However, depending on where and with whom your different pensions are, it can sometimes be financially more beneficial to leave them where they are. Withdrawal fees can be eye watering with some providers.
Do you have a forgotten pension?
There’s actually a decent chance you have. Recent figures show there were 19.4m dormant pensions in 2018, up from 15.8m in 2017. The increase occurred mainly in the private sector, where the number of preserved pensions (pensions left behind when someone changes job) jumped from 11.6m to 13.6m. It can be easy to lose track of pensions, especially if you’ve worked for several different employers over the years and signed up to lots of different schemes.
Tracking down forgotten pension
The Government offers a free Pension Tracing Service for people trying to locate lost pensions. This can help you find contact details for your workplace or personal pension scheme. However, the service won’t tell you the details of your pension such as what the value is, so you’ll need to contact the pension provider to find out. You’ll also need the name of your employer or the scheme if it’s a workplace pension, or the name of the pension provider if it’s a personal pension. If you don't have the time to contact each provider, we can help out. We describe our pension tracing service here.
If you contracted out of SERPS (State Earnings Related Pension Scheme), then there’s also a chance you may have lost a pension. If you think you may have contracted out of SERPS, we can help you find lost SERPS pensions.