Complexity Is a Retirement Risk

The Confidence Gap

There's a specific number behind something most people sense but rarely name: the ability to manage money declines steadily after sixty. Confidence in that ability doesn't decline at all. The two lines move in opposite directions, and the gap between them is where mistakes happen, quietly, and go uncorrected, because the person best placed to notice is the same person whose judgement is slipping.

This isn't a fringe finding. Research on ageing and financial decision-making, notably the "Age of Reason" work by economists Sumit Agarwal, John Driscoll, Xavier Gabaix and David Laibson, found that financial capability across a range of tasks, from mortgage terms to credit card use, tends to peak in a person's early fifties and decline from there. Confidence doesn't track it. If anything, decades of managing your own money tend to make people more sure of themselves over time, not less.

That combination, declining ability paired with steady or rising confidence, is a specific kind of risk. It's not the risk of getting a single big decision wrong. It's the risk of small, compounding mistakes made with total conviction: a duplicate ISA subscription nobody remembers opening, a pension left in a fund nobody's checked in a decade, a scam email that looks plausible enough because the details are just fuzzy enough not to raise the usual alarm.

Complexity Is the Multiplier

None of this would matter much if most people held their money in one place. Almost nobody does. A typical career now produces two or three workplace pensions, an old SIPP from a previous employer switch, one or two ISAs opened in different tax years for different reasons, maybe a GIA that started as a "quick experiment," and a scattering of savings accounts chasing whatever rate was best at the time.

Each account is a small, manageable thing on its own. Together, they add up to something nobody fully holds in their head: a dozen logins, a dozen fee structures, a dozen fund choices made years apart under different assumptions, a dozen places a beneficiary nomination might be years out of date. Complexity doesn't make any single decision harder. It multiplies the number of decisions there are to get wrong, and the number of places an oversight can hide.

That matters more, not less, as decision-making ability declines. A simple portfolio needs to be right once. A complex one needs every piece to stay right, indefinitely, with nobody actively watching most of them.

What Complexity Actually Costs

The costs rarely show up as one dramatic loss. They show up as a slow leak:

• Forgotten accounts. Small pensions from jobs held decades ago, still invested, still charging fees, tracked by nobody. The Pensions Policy Institute has estimated the value of lost pension pots in the UK runs into the billions.
• Duplicated or contradictory risk. Five funds across five platforms can quietly add up to the same handful of large-cap holdings, with none of the diversification the account count suggests.
• Fee drift. Legacy pension products from decades ago often carry charges well above what a modern platform offers, and nobody revisits the comparison once the account is out of sight.
• Stale beneficiaries. A nomination form filled in for a pension opened in your twenties doesn't update itself when your circumstances change.
• A wider attack surface for fraud. More logins, more emails from more providers, more plausible-looking prompts to "verify your details" on an account you barely think about.

None of these require a single bad decision. They're what happens by default when nobody's actively minding the details, which becomes more likely, not less, the longer a plan sits untouched.

Simplicity as a Form of Risk Management

Diversification gets treated as the main lever for reducing risk in a portfolio, and it is. But the number of moving parts in a plan is a risk factor of its own, separate from asset allocation. Two portfolios can hold an identical mix of stocks and bonds; the one spread across nine accounts on six platforms carries more operational risk than the one held in two or three, purely because there's more surface area for something to go unnoticed.

That's why many people choose to consolidate scattered pensions and ISAs into fewer accounts while they still have the full capacity to compare providers, weigh exit fees, and check that nothing important is lost in the transfer, rather than leaving that comparison for a version of themselves, or a family member, with less context and less time. The earlier that happens, the more of that decision-making is still being done by the person with the clearest picture of why each account exists in the first place.

Consolidation isn't the only shape this can take. A standing habit of an annual review, alone or with a partner, does something similar: it forces the scattered picture back into one place at least once a year, rather than letting it drift for a decade. Either way, the point isn't to hold less money. It's to hold it in a way that takes fewer active decisions to keep safe.

A Legal Backstop, Not Just a Simpler Portfolio

Consolidation and a standing annual review both assume someone is still able to act on what they find. That assumption doesn't always hold, and it doesn't always fail gradually. A stroke, an accident, or a sudden decline in capacity can remove the ability to manage money at any age, not just late in retirement.

A Lasting Power of Attorney (LPA) is the legal piece that covers that gap. It lets you name someone you trust to manage your finances, or make health and welfare decisions, if you're ever unable to do so yourself. Without one, a spouse or adult child can't simply step in and pay a bill or move money between accounts on your behalf; even with full trust and good intentions, they'd need to apply to the Court of Protection for deputyship, a process that's slower, more expensive, and more restrictive than most families expect.

I helped my grandmother set hers up recently, prompted by nothing more dramatic than her wanting the question settled while she was still the one able to answer it. The paperwork itself was straightforward, done through gov.uk without needing a solicitor. What stood out was the timing: an LPA can only be registered while the person granting it still has mental capacity. It's not something you can arrange after the need for one has already arrived, which makes it a decision that has to be made earlier than it feels necessary, in much the same way that consolidating scattered accounts is easier long before anyone's judgement is in question.

It sits alongside simplification rather than replacing it. A tidy set of two or three accounts is still easier for someone else to step into than nine scattered ones, but only if there's a legal mechanism letting them step in at all.

The Same Risk, From the Other Direction

Everything so far has been about one person's own capability declining on its own timeline. Couples face a version of the same risk that can arrive faster and with less warning: one partner manages the money, quietly, for years or decades, while the other doesn't know where anything is held, how it's invested, or why.

It's a common enough shape that most people recognise it immediately, even if it's rarely said out loud. One partner tracks the platforms, understands why the portfolio is allocated the way it is, and handles the annual review. The other trusts that it's being looked after, without a way to independently check. That works fine for as long as the partner doing the managing is around to keep doing it. Bereavement, or a sudden loss of capacity, turns that arrangement into the same scenario described above: a household's financial complexity landing all at once on someone with no context for any of it, at the worst possible time to be learning.

The fix isn't complicated, only easy to put off. Both partners knowing where accounts are held, roughly how the portfolio is split and why, and who to contact, a platform, an adviser, an accountant, closes most of that gap before it opens. It doesn't require both people to manage the money day to day. It requires the one who doesn't to be able to find everything and understand the shape of it, so inheriting the plan or suddenly becoming responsible for the family's finances means continuing something familiar rather than reconstructing it from scratch while grieving.

Modelling It Rather Than Guessing

It's hard to judge whether consolidating two pensions or closing an old ISA makes a real difference without seeing the numbers side by side. Running a plan through Scenarios makes that concrete: you can see what a simplified set of holdings does to your projected outcomes compared with the scattered version, using your actual account balances and a full UK tax position rather than a guess. Sometimes the answer is that consolidation costs nothing and removes a genuine source of ongoing risk. Sometimes an old product has features, like guaranteed annuity rates, worth keeping despite the extra account to track. Either way, it's a comparison worth seeing rather than assuming.

This is methodology and information, not financial advice, and Scenarios isn't authorised to provide regulated advice. Decisions about consolidating or transferring pensions, especially older ones with guarantees or safeguarded benefits, are worth checking with a regulated financial adviser before acting, since some transfers are irreversible. Setting up a Lasting Power of Attorney is a legal rather than financial decision, and Scenarios doesn't provide legal advice either; the gov.uk service linked below is the starting point, with a solicitor best placed to help if the family situation is more complicated than usual.

Further Reading

• Agarwal, S., Driscoll, J., Gabaix, X. and Laibson, D. "The Age of Reason: Financial Decisions Over the Life Cycle." Brookings Papers on Economic Activity, 2009.
• Pensions Policy Institute. "Lost Pensions: What's the Scale and Impact?"
• MoneyHelper. "What to do with old pensions." moneyhelper.org.uk
• gov.uk. "Make, register or end a lasting power of attorney." gov.uk/power-of-attorney