The pensions industry has been urged to simplify the pension transfer process, after research from Cushon revealed that 33 per cent of savers don't know how to combine their pension pots, and nearly a quarter (23 per cent) are unaware that this is even an option.
The research found that the majority (91 per cent) of people have held more than one job in their careers, but eight in ten (80 per cent) have never transferred one of their pension pots into the other.
As a result, Cushon found that a quarter (25 per cent) of UK savers have lost track of at least one pension pot. This also follows on from previous research from the Pensions Policy Institute (PPI), which revealed that 2.8 million pension pots worth £26.6bn are considered lost.
However, Cushon argued that greater awareness amongst savers about transferring pots would reduce these figures drastically, emphasising the need for the pensions industry to show savers that combining pensions is possible and ensure that transfers can be processed efficiently.
Although the provider acknowledged that pensions dashboards will help people keep track of their various pensions by showing them all in one place, it argued that “persistent delays” to the creation of it means the industry cannot rely on this initiative to address this lack of understanding.
Instead, Cushon suggested that there needs to be an increase in industry uptake of digitisation via regulatory requirements, pointing out that modern pensions are still dominated by legacy systems and paper-based documents.
The provider argued that innovative technology, such as mobile apps, will not only make the transfer process a lot quicker for members, but will also reduce friction as they’ll know how much they have in their pots, meaning they’d have more impetus to transfer.
In addition to this, it suggested that when employers change pension providers, the original existing pension pot in some cases can’t be automatically transferred, so the existing pot remains with the previous pension provider which adds to the problem.
One approach to this, highlighted by Cushon, would be for government to allow automatic transfers in the case of a provider change, ensuring that pension savers don’t need to do anything for their current employer’s pension to move.
