We are the voice of insurance and long-term savings | Contact us

The Adventure of the Lost Pensions

As the ABI continues work with members and Government to reunite savers with their lost pensions and with Government currently considering expansion to the Dormant Assets Scheme which provides fund to charitable causes, our Policy Adviser for Long-term savings policy, Evey Tang looks at how this might affect customers. 


As human beings we are often distracted by adventures of different shapes and sizes, be it getting a new job or moving into your first home. During these exciting and occasionally stressful times, mundane tasks like updating your address with your pension provider is probably the last thing on your mind. In fact, only 1 in 25 would prioritise notifying their pension providers when moving home. On average people move home 8 times in their life, so it is easy to lose contact with some of your providers.

Providers spend millions every year to trace these gone-away customers and prompt them to verify their new address. However, many customers fear that these communications are scams and do not respond. This means customers may not receive all communications, which could ultimately lead to delays in paying their money. According to research we commissioned, lost pensions across the country could worth as much as £19.4 billion.

The ABI and our members are committed to improving reconnection rates within the insurance and pensions sector. Since 2016, we have published an industry framework, a customer engagement tool kit and even commissioned a behavioural science project to find appropriate language ‘nudges’ that boost the response rate of reconnection communications. To make it easier for customers to reach out to their providers, we have dedicated pages explaining how to track lost assets and contact a provider. Our efforts and attempts to innovate have been recognised and applauded by the Digital Infrastructure minister.

Despite the providers’ best efforts, they are not Sherlock Holmes. There will always be ‘cold cases’ that remain unsolved and pots unclaimed. Many are forgotten small pots, for example from a short-term job, or belong to deceased customers whose death was not reported to the provider. These dormant pots will remain untouched, waiting to be claimed, while their value eventually might be eroded by inflation.

There are better ways to manage this money.

When bank and building society accounts lay dormant for over 15 years and the account owner is unreachable, the money can be distributed to good causes under the Dormant Asset Scheme. Before the money is transferred to the Scheme, banks will make considerable efforts to reconnect customers with this money. The transferred money will then be managed by an independent reclaim fund, and can be reclaimed fully and perpetually by their owners through the bank which originally hosted their money. Surplus funds will be used to support good causes. The Scheme is completely voluntary and 31 banks and building societies are currently participating. Since the Scheme’s introduction in 2008, £745 million of the fund has been used to support housing for vulnerable people, financial inclusion and 2000 good causes in the country. £100 million has also been successfully repaid to their owners.

The Government is now considering expanding the Scheme to cover other financial services, this includes insurance and pensions. The ABI has been working closely with the Government and key stakeholders, including the Insurance and Pensions industry champion Kirsty Cooper to make this opportunity possible. Last year, the industry champions published a blueprint report outlining how the Scheme can expand in a phased approach, which included the recommended product scope, dormancy definitions and key principles. These together will ensure that the only assets that can be transferred are truly dormant, very unlikely to be reclaimed, already held in cash and do not have an impact on other policyholders.

As we progress to the legislation stage, two priorities will need extra care. The first is repatriation. In our recent response to the Government’s consultation on expanding the Scheme, we outlined that industry and Government could work more closely together on the Scheme’s priority of repatriation. Rather than waiting for customers to reach out to providers, verifying customers’ new addresses against reliable data sources, such as those of the Government, can support industry’s reconnection efforts and directly benefit consumers. No personal data will have to be transferred as it would only be a ‘yes/no’ enquiry service. The Government’s Digital ID programme might soon allow auto-verification to become a reality, and this could be the game-changer the industry needs. We look forward to learning from the Government’s current pilot and are keen to be part of it in the future.

The other priority is ensuring public confidence in their rights to their own assets. Delivering the right message to the public will be key to the Scheme’s success. As of today, only around 1 in 5 of the public are aware of the Scheme, not to mention knowing how it functions. There is a need for clearer explanation around providers’ reconnection efforts and customers’ perpetual right to full reclaim. The Government has particular concerns around the potential impact on the public’s trust in pensions if the Scheme is to be expanded. We recently conducted an opinion poll around awareness, and impacts on decision making regarding the Scheme. For most (89%), decisions around saving into a pension will not be negatively impacted if the Scheme is to be expanded to cover pensions. 9% even said that it would make them more likely to save into a pension. We also asked what would help people feel more comfortable about money being transferred into the Scheme; the most common answer (43%) was the request for information on the reclaim process being shared. By providing more transparency and clarity, there is a good chance that we can maintain people’s trust.

Expanding the Scheme can make hundreds of millions of pounds available to vulnerable people during difficult times, while the owners can still reclaim their money fully and perpetually. This ultimately is a win-win situation for all, and a great opportunity to demonstrate what responsible investment could look like. Reuniting customers with their lost money will always be the industry’s priority and at the centre of the Scheme. We will continue to ensure the adventure of lost pensions can have a happy ending – in the hands of their owners or those in need.

Last updated 24/07/2020