Study Finds One in Four Can't Name Retirement Provider
What happened
A new study from PensionBee reveals that 25% of U.S. adults are unable to confidently name the financial institution that manages their retirement accounts. The finding points to a surge in dormant or forgotten accounts and a lack of engagement with retirement benefits, an issue for HR and benefits platforms.
Why it matters
- The issue of "lost" pensions is substantial, with an estimated 3.3 million dormant pension pots in the UK alone, holding a collective value of £31.1 billion. The average value of each of these lost pots is approximately £9,470. - Frequent job changes and moving residences are primary contributors to the problem of lost pensions, as individuals often forget to update their contact information with previous pension providers. The modern workforce's mobility, with individuals holding an average of 11 jobs in their lifetime, exacerbates this issue. - Automatic enrollment in workplace pension schemes, while successful in increasing retirement savings participation, has unintentionally led to a proliferation of small, scattered pension pots, making them easier to lose track of. - For those who have lost track of a pension, resources like the U.S. Department of Labor's Retirement Savings Lost and Found Database, launched in late 2024, can help locate forgotten accounts. Other tools include the National Registry of Unclaimed Retirement Benefits and contacting former employers' HR departments. - The consequences of dormant accounts can be significant, with one analysis suggesting that a worker could lose up to $90,000 in potential retirement savings due to "left-behind" 401(k)s. This is because forgotten funds may be held in overly conservative, low-return investments and eroded by fees. - When employers are unable to contact former employees, unclaimed retirement balances below a certain threshold (currently $7,000) can be moved into "safe harbor" IRAs without the employee's consent, which often have low returns and high fees. - A significant portion of retirement savers are not actively engaged with their accounts; 55% have never consolidated old accounts, and 9% "never" or only review their asset allocation every three years. This disengagement increases the risk of portfolios becoming misaligned with their risk tolerance over time. - When dormant accounts remain unclaimed for an extended period, the assets may be turned over to the state's unclaimed property division under a process called escheatment.
Key numbers
- A new study from PensionBee reveals that 25% of U.S.
- - The issue of "lost" pensions is substantial, with an estimated 3.3 million dormant pension pots in the UK alone, holding a collective value of £31.1 billion.
- The average value of each of these lost pots is approximately £9,470.
- The modern workforce's mobility, with individuals holding an average of 11 jobs in their lifetime, exacerbates this issue.
What happens next
- The consequences of dormant accounts can be significant, with one analysis suggesting that a worker could lose up to $90,000 in potential retirement savings due to "left-behind" 401(k)s.
- This is because forgotten funds may be held in overly conservative, low-return investments and eroded by fees.
- When dormant accounts remain unclaimed for an extended period, the assets may be turned over to the state's unclaimed property division under a process called escheatment.
Quick answers
What happened in Study Finds One in Four Can't Name Retirement Provider?
A new study from PensionBee reveals that 25% of U.S. adults are unable to confidently name the financial institution that manages their retirement accounts. The finding points to a surge in dormant or forgotten accounts and a lack of engagement with retirement benefits, an issue for HR and benefits platforms.
Why does Study Finds One in Four Can't Name Retirement Provider matter?
The issue of "lost" pensions is substantial, with an estimated 3.3 million dormant pension pots in the UK alone, holding a collective value of £31.1 billion. The average value of each of these lost pots is approximately £9,470. Frequent job changes and moving residences are primary contributors to the problem of lost pensions, as individuals often forget to update their contact information with previous pension providers. The modern workforce's mobility, with individuals holding an average of 11 jobs in their lifetime, exacerbates this issue. Automatic enrollment in workplace pension schemes, while successful in increasing retirement savings participation, has unintentionally led to a proliferation of small, scattered pension pots, making them easier to lose track of. For those who have lost track of a pension, resources like the U.S. Department of Labor's Retirement Savings Lost and Found Database, launched in late 2024, can help locate forgotten accounts. Other tools include the National Registry of Unclaimed Retirement Benefits and contacting former employers' HR departments. The consequences of dormant accounts can be significant, with one analysis suggesting that a worker could lose up to $90,000 in potential retirement savings due to "left-behind" 401(k)s. This is because forgotten funds may be held in overly conservative, low-return investments and eroded by fees. When employers are unable to contact former employees, unclaimed retirement balances below a certain threshold (currently $7,000) can be moved into "safe harbor" IRAs without the employee's consent, which often have low returns and high fees. A significant portion of retirement savers are not actively engaged with their accounts; 55% have never consolidated old accounts, and 9% "never" or only review their asset allocation every three years. This disengagement increases the risk of portfolios becoming misaligned with their risk tolerance over time. When dormant accounts remain unclaimed for an extended period, the assets may be turned over to the state's unclaimed property division under a process called escheatment.
