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Are your clients entitled to any of the £26.6 billion held in lost pension pots?

Download a version of this article for your clients below.

21/03/2023
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Read full reportAre you entitled to any of the £26.6 billion held in lost pension pots
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The cost-of-living crisis is putting pressure on people’s finances and many are concerned about how it will affect their retirement savings.

According to The Actuary, 70% of workers believe they will have to defer their retirement, and one in five people stopped or reduced their pension contributions in the 12 months from January 2022.

But even when the cost of living is high, you may be able to boost your clients’ retirement savings by recovering their lost pension pots. The Pensions Policy Institute (PPI) reports that there is £26.6 billion sitting in forgotten funds, ready to be claimed.

Over 2.8 million pension pots are “lost”

The PPI estimates there are 2.8 million lost pension pots that people could add to their retirement savings. The Great British Retirement Survey, conducted by interactive investor in 2021, found that 66% of people had multiple pensions, and 15% of those people had four or more.

In many cases, pension pots get lost when clients start a new job. They may begin paying into a new pension scheme, while their old one is left dormant. If they move home and forget to update the old pension provider, they could lose contact with them and, over time, may forget about that pension altogether.

Data from the PPI shows that this is becoming more common. The number of lost pension pots has increased by 75% between 2018 and 2022, and there are several potential reasons for this.

Firstly, the Covid-19 pandemic encouraged more people to move home. Data from Property Reporter shows that 266,270 people moved in the first half of 2021 alone. This increase could mean that more people have lost contact with old pension providers.

Additionally, attitudes to work are changing and loyalty to employers is dropping. According to career research website Zippia, the average person changes jobs 12 times in their lifetime. However, younger people are more prone to job-hopping. The average 25 to 34-year-old stays in a role for 2.8 years, while 55 to 64-year-olds stayed for 9.9 years.

The combination of these two factors means that clients are likely to deal with more than one pension provider, increasing the chances of them losing track of their savings.

But is it worth tracking these lost pension pots down?

Finding lost pension pots could make retirement planning easier

The PPI estimates lost pension pots are worth an average of £9,470 each, so it could be an excellent opportunity to boost your clients’ retirement funds. If they are at all concerned about the impact of rising living costs, the money in old pension pots could help make up their shortfall.

It’s not just about the extra money though – you need to be confident that you have all the information before you can form their financial plan. Some of the old pension pots may have higher fees, or they could be performing poorly. Thankfully you’ll be able to help them maximise those savings once you find the lost funds.

You may consider consolidating your clients’ smaller pensions into newer schemes that perform better or have lower fees. As well as making their pension savings easier to manage, you may be able to align their savings better to their goals.

As advisers, we know that it’s better to take control of pension funds now, rather than later. If clients wait until they are almost at retirement age, it could be a last-minute rush to find their savings and you may have already missed your chance to move them into more favourable pension schemes.

Contact old providers to find lost pension pots

If your clients think they might have lost a pension pot, start by asking them to make a list of all of their employers, and note whether they had a pension with them or not.

The full auto-enrolment rollout was completed in February 2018, so they should have a workplace pension for any job they started after that date. But they may want to double-check with any employer they worked for before then.

Once you have a list of all of the pensions they think they should have, you’ll need to contact their providers. If it’s not a provider you often deal with, you may find the Pension Tracing Service helpful.

We’ve published a version of this article for clients – download it below.

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pension Regulator.

Read full reportAre you entitled to any of the £26.6 billion held in lost pension pots
2 pages

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The views and opinions contained herein are those of Benchmark. They do not necessarily represent views expressed or reflected in other Benchmark communications, strategies or funds and are subject to change. This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable, but Benchmark does not warrant its completeness or accuracy. The data has been sourced by Benchmark and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. Benchmark is not responsible for the accuracy of the information contained within linked sites. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Past Performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.

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