£550m of our money lies dormant in 'sleeping' pensions
LUCIANO Pavarotti was the world's most famous operatic tenor, who brought the famous classical aria ‘Nessun Dorma' to the masses when he sang it for the World Cup in 1990.
In Puccini's opera Turandot, the Unknown Prince sings the aria to the beautiful but heartless Princess – she has ordered everyone in the land to stay awake all night and guess his name, which would allow her to escape her pledge to marry him.
So ‘Nessun dorma' means “None shall sleep” or, in my slightly freer translation, “You've got them all on the night shift, Princess”.
Well, before you think you've strayed into the arts pages, I'd better tell you how this relates to our most important concern: your money.
Did you know there is something like £550 million lying in ‘sleeping' pensions and insurances in the UK?
This is an estimate by the Independent Dormant Assets Commission, which oversees the government's current programme of seizing assets from unused or ‘dormant' bank accounts.
The definition of a dormant bank account is when there have been no transactions – neither lodgements nor withdrawals - for over 15 years. Any monies seized from dormant bank accounts are used for good causes.
But here's this week's shocker: now they are talking about extending the scheme to pensions that appear to have lost their owner, and trying to work out a way of defining what dormant should mean in a pensions context.
Clearly, it would be quite normal for a workplace pension to go untouched for 15 years – if you change job and start a new one, for example. Indeed, if the auto-enrolment pension scheme broadens to cover 18-year-olds, then in theory someone's pension from their first job could be left untouched for close on 50 years!
As first discussions about this unlikely scheme continue (and it may never happen), most experts agree that a time-based definition of ‘dormant' wouldn't work. They favour an age-related definition. For instance, Aegon's head of pensions Kate Smith has suggested that if a pensions company has been unable to locate or contact a customer who would now be over 70, to reunite them with a forgotten pension, well, that situation might be closer to a fair definition of ‘dormant'. (If the customer does turn up later, by the way, they would be protected by a right to have their full amount restored to them.)
During the 2016 Budget, the government made a commitment that the pensions industry would develop what is called a ‘pensions dashboard', enabling everyone to view details of all of their pensions together. This is due to go live next year, and should make it a lot easier to track your various pensions, no matter how many times you change jobs (or get fired) during your career.
All of this tells us two things. We know from the recent tinkering of successive governments with the pensions system, that pensions, and in particular the state pension, is no longer safe from the ravages of cost-cutting. The last decade has seen the abolition of means-tested pension credits, the raising of the state pension age, and repeated concerns about the future viability of the state pension as it is today.
Second, it tells us that it is still easy to lose track of a small ‘sleeping' pension, that you may have from a job 20 or 30 years ago.
And this is where financial advisers can help. Taking financial advice throughout your career can not only ensure you know where you stand with your pensions, but will make certain you are financially fit right across the board, covering family protection and insurances, as well.
Anyway, getting back to Pavarotti, you want to know if the Unknown Prince got his princess? I don't know. I fell asleep!
:: Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005. Further information on Facebook at “Kennedy Independent Financial Advice Ltd”