There may be valuable treasures hidden just out of sight, waiting for your clients to find them.
It may sound like something from a Robert Louis Stevenson novel with pirates, weathered maps, and charming sea shanties. But the treasure we speak of is very real and attainable — lost UK pensions.
The Association of British Insurers (ABI) reports that, since 2018, the value of lost pensions in the UK has risen 37%, reaching £26.6 billion in late 2022. This is split across approximately 2.8 million pots, an increase of 75% over the last four years.
Retirement needs play a critical role in your clients’ long-term financial plans and are likely to influence a lot of their decisions.
So, could locating a lost pension pot help bridge any shortfall in their plans and provide your clients with a boost to their emotional wellbeing?
Read on to discover three important ways a lost pension could benefit your clients’ plans and how they can start the tracing process.
1. Your clients could have multiple lost pensions with significant value that could boost their retirement savings
In the words of a young adult novel: “May the odds be ever in your favour”. It is a mantra we believe in at Grey Parrot.
Knowing the odds of your clients having enough money to do everything they want to do in life, without fear of running out, is a vital part of our planning process.
But — and here’s the thing — most investment managers underperform the market. So, taking steps to boost their odds, whether it is through evidence-based investing or locating lost funds, could be an invaluable move in the right direction.
Across a career spanning 30 or 40 years, it can be easy for your clients to lose track of their various workplace pension schemes, as they move homes or change jobs over the course of their lives.
According to MoneyAge, 28% of Brits have saved money across potentially three or more pension pots over their lifetimes. Research from Canada Life found that of the 1 in 6 Brits who have tried to locate lost pensions, the successful among them unearthed, on average, at least £6,351.
An even luckier 8% of successful searches recovered significant pots in excess of £20,000.
Proactive Investors reports that over half of UK households are currently facing a potential retirement income shortfall. So, tracing a lost pension pot or two could be a welcome boost to your clients’ retirement savings.
2. Your clients’ lost pots might have accrued sizeable “compound returns” even if the initial contributions were only small
Like all professional people, we rely on tools, and our particular toolbox contains a variety of financial products. One of the most powerful, in terms of retirement planning, is the pension.
Time and patience are two crucial ways your clients can build their retirement savings.
This is especially true of one incredibly valuable benefit of long-term pension savings — the growth generated by “compound returns”. Any returns gained by a pension fund are typically reinvested, essentially creating a cycle of “returns on returns” that has the ability to grow the value of your clients’ pots over years and decades.
It is a passive approach that can see even the smallest of initial contributions, given time, grow into impressive sums.
If your clients have misplaced pension pots over the course of their careers — that have been quietly generating compound returns for a significant amount of time — they may locate a pot that has seen considerable growth on the amount they initially contributed.
According to MoneyMarketing, only 1 in 25 people think to inform their pension provider of a change of address. So, there is a decent possibility that your clients have a lost fund out there silently growing.
3. Your clients could opt to consolidate their lost pots with emotional and financial benefits
Once your clients have located a lost pot, they might benefit from opting to consolidate their various pension schemes.
Some older pension schemes can have higher associated charges, and eliminating those costs could lead to sizeable savings for your clients. Consolidating their pots could also reduce the fees arising from drawing from multiple schemes.
Additionally, reducing your clients’ pension plan workload, through consolidating multiple pots into a single one, can save valuable time and reduce any related stress. Time is money, so any savings for your clients’ schedules could be a huge boost on their own.
Consolidation does come with some downsides, such as losing risk protection, lump sum entitlements, or guaranteed annuity rates. Existing pensions may also be performing very well with low charges.
So, before making any major decisions, your clients should get in touch with Grey Parrot, as working alongside a financial planner can have a range of benefits, especially in the build up to retirement.
Finding a lost pension is a relatively simple process
The government’s Pension Tracing Service is free to use and can assist your clients in locating any pensions they’ve lost over the years, even if they don’t recall key details about their previous pension providers.
Your clients can speed up the process by trying to locate as much important information as possible before-hand, which might include:
- The names of their previous employers or pension services
- Dates they believe they belonged to their pension scheme
- Their personal details including National Insurance number
- Their past employers’ key information such as trading names, business addresses, and their relevant industry.
While your clients treasure hunt might not turn up anything, there is absolutely no harm in trying. If they do trace a lost pot or two, it could give their long-term plans a significant boost.
Get in touch
If your clients are worried about a retirement shortfall and are interested in ways to boost their plans, they should contact us by email at info@grey-parrot.co.uk or call us at 02039 871782.
Please note
This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.
Workplace pensions are regulated by The Pension Regulator.
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