Finding your Lost Treasures
Gardening and home improvements seem to be among the most popular pastimes in this time of crisis but investing any spare moments in a financial ‘spring clean’ may be a more productive use of your time.
Why not start with your pension pot?
I say pot, but most people have many different legacy pensions they have accrued in different jobs throughout their career. Coronavirus and the upending of the UK economy mean this number is likely to skyrocket in 2020. The Office for National Statistics estimates the average person will work in approximately 11 jobs in their lifetime. In normal years, about 10% of people switch jobs. This year it is going to be a lot higher and with the introduction of auto enrolment in 2012, most of these will come with a new pension.
Many people leave pensions behind at old providers for years. Bringing them together is a much better idea but this can be a tedious and sometimes near-impossible task, involving reams of paper, forgotten passwords and agonising conversations with call-centre staff.
It’s Your Money
Despite these challenges, keeping on top of old pensions and consolidating them is vital if you want to maximise long-term returns. This is your money you have worked hard for so it makes sense to know how much you have, where it is invested and whether it could work better for you.
There is rarely a ‘right time’ to carry out a financial spring clean as people’s attitudes and behaviours change all the time but the recent crisis and subsequent sell-off in markets are likely to highlight any weaknesses in your investments.
Follow the Money
You can be your own detective by using the Government’s Pension Tracing Service. If you want someone to carry out all the annoying paperwork for you, then look no further than your Prosperis adviser. There are also some apps and fintech businesses offering help (but not usually any regulated advice, which you will need).
In 2018, the ONS estimated that around 13.6 million pension pots lay “dormant” and it believes this figure is growing exponentially larger, expecting it to hit 21.5 million this year. Even more shocking than the number of dormant pensions is their total value, with the Association of British Insurers (ABI) estimating this figure to be worth nearly £20 billion.
Many commentators believe the pension industry must shoulder much of the blame for making things unnecessarily complicated for people to sort these issues. Lots of people feel intimidated about getting on top of their pensions and combining them but it can be in your best interests to do just that.
The primary experience people have with their pensions is a big envelope that arrives maybe once a year – if your pension provider still has your current address. It tends to be a bit of an off-putting administrative experience for the vast majority of people. Here at Prosperis, our experience is we often find that people’s money is sitting around and languishing in funds that have had poor performance, poor diversification, high charges, and the money has not done very well. In some cases, we have found the fees have completely eroded the pension.
Clients are often pleasantly surprised to find a lost pot, but it can just as often turn out to be an unwelcome shock owing to poor returns and/or high fees. To plan for your future, however, you need to begin by finding out where you stand today so maybe its time to contact your Prosperis adviser and at least have a chat.
