Unfortunately, many people lose track of or neglect their pensions from past jobs, leaving substantial sums of money languishing in underperforming schemes. This article explores how failing to consolidate your pension funds can result in missed growth opportunities, costing you tens—or even hundreds—of thousands of euros by the time you retire, with practical advice on how to track down and manage your old pensions.
“Did someone lose this €500m?”
According to the Irish Times, an estimated €500 million in unclaimed pension benefits remain unclaimed in Ireland, with some estimates suggesting the figure could be as high as €1 billion. Go ahead and read that again as you wonder how anyone could lose track of so much money. Unfortunately, many people lose track of pensions from previous jobs, leaving substantial funds behind in these schemes, some of which are entirely forgotten or lost.
Even if your pension isn’t “lost,” leaving it with the past provider without proper oversight can have significant downsides. Without proactive monitoring, your pension fund could underperform substantially. This isn’t just about missing out on a few percentage points of growth—over the 20-30 years, those lower returns could amount to tens (and often hundreds) of thousands of euros less in your retirement fund by the time you retire.
With this in mind, would it surprise you that most people pay more attention to their energy bills and car insurance than their pensions?
“Okay, so I found my past pension – what now?”
Once you have located your past pension(s), or your advisor has located it for you, you will have two main options: leave it where it is or transfer it to a new pension, either your new employer pension scheme or personal pension product, such as a Personal Retirement Bond. There are two critical considerations in this decision.
Consolidation is key
People change employers far more frequently than in the past. Keeping track of multiple past pension funds is simply asking for trouble. Unless your old pension scheme is particularly good, i.e. it has a range of attractive investment choices and very low charges, it is recommended to consolidate your funds into a new pension when you change employer. This helps ensure you never lose track of your pension or its performance.
Performance matters most
Before we discuss performance, let me start by saying that employer pension schemes are usually fantastic. Picture this: as a higher-rate taxpayer, you contribute €100 per month, your employer matches it, and you receive €200 going into your pension for a net cost of just €60. That’s an instant, risk-free 233% return on investment—where else can you find that? Go ahead, I’ll wait.
But here’s the catch: the magic stops when you leave that employer. Once the contributions stop, investment performance is the only thing growing your pension pot. And here’s the problem: many employer schemes don’t exactly shine in this department. Many of their fund options fall short of benchmark returns, leaving your money languishing when it should be working hard for you.
To illustrate this, take a look at the performance comparison between the three funds. Fund A, a benchmark portfolio comprising passive equity and bond ETFs, achieves strong returns with a risk level almost identical to Fund B. Despite this, Fund B—offered by one of the most common occupational pension scheme providers—delivers substantially lower returns. Fund C, on the other hand, takes on even higher risk, yet still underperforms Fund A by a significant margin. In other words, Fund C requires you to take more risk for even lower returns.
Let’s look at a practical example. Imagine you left your old job five years ago and got started in a new role with a new pension scheme. Life got busy, and your old pension pot, worth €100,000 at the time, stayed right where it was, in your former employer’s occupational pension. It’s easy to see how this can happen—your focus shifts to settling into your new job, managing your current finances and everything else life throws at you. Meanwhile, the old pension gets forgotten.
So, how much would that inaction have cost you? If your pension had remained in Fund B, it would have grown to €138,527 today. In Fund C, it would be worth just €130,970. Now compare that to taking decisive action—moving your pension to a Personal Retirement Bond and investing it in a benchmark passive fund (Fund A). In this case, your pension pot would have grown to €167,307. That’s a difference of nearly €30,000—or over €36,000 if your old pension was invested in Fund C. Now, think about how far that gap could widen another 20 years. How would you feel realising your retirement fund is worth €100k less than it could have been?
What can I do?
Here are three actionable steps to get started reviewing your past pensions and doing your best to avoid missing out on a bigger retirement fund.
- Make a list of jobs where you and/or your employer paid into a pension.
- Find any documentation or login details you can for these pensions.
- Contact your past pension providers and request the following documents:
i. Your Leaving Service Options;
ii. Your most recent Annual Benefit Statement; and
iii. Your Fund Factsheets to show what your pension is invested in.
This is all you need to start reviewing your past pensions at a high level. However, the process can be time-consuming, and once you have your documentation, deciding what to do next can be a little more complicated.
Need help?
If you have any questions, need help tracking down past pensions or need guidance on what to do next, feel free to reach out via LinkedIn or email (sam.oreilly@gsbcapital.ie) for a free consultation.