Client Story #3: The ‘Lost’ Pension

This is my favourite story of my career.

When I was an adviser in the West Midlands, I would regularly visit local workplaces and speak with the employees. Often, these discussions were one-on-one, at a crucial point in the individual’s life (such as their transition to retirement, marriage, new child, etc.), and for most people, it was the first time they had spoken with a financial planner.

I remember during one visit to a local metal supplier, I had delivered a presentation on retirement planning. After the session, a few people wandered up with questions. Most of these were general, straightforward enquiries, but one person requested an individual chat over a coffee. He explained that he’d been with the company for over 20 years, he was ready to retire ASAP, but he wasn’t sure if it would be possible financially.

We arranged a meeting at our office and had a good, relaxed chat. He was a family man, and the arrival of a new granddaughter was one of the prompts that had caused him to think seriously about working less. His ideal situation would be no work at all, but again, money was a factor. His plan was to spend more time with the (growing) family, get back into golf, and generally enjoy having more free time in his days.

“Perfect”, I thought. “This is exactly the sort of person I can help”. We started the usual process of taking a deeper dive into his circumstances; a discussion around his current income, expected income in retirement, expenditure (essential, desirable, and luxury), major milestone goals, we obtained a state pension forecast, and more. During the discussion - we’ll call him Tom - Tom mentioned that, prior to working for his current employer, he had been a member of another group pension with a previous employer. Tom had unfortunately no idea who that pension was with, either at the time or now. He’d moved homes multiple times since leaving his old employer and he doubted the pension provider had his current details. He had no paperwork to speak of.

These ‘lost pensions’ are a lot more common than you might think they are. The Pension Policy Institute estimated that there is £26.6 billion - yes, billion - of lost pension wealth in the UK. Yikes.

I had mentioned to Tom that he might want to use the Government’s Pension Tracing Service to try and track down his old pension. Whilst Tom didn’t know the name of the pension provider, he did know the company he used to work for. They were no longer in business, and couldn’t be contacted. However, Tom was able, simply by inputting their name, to get a list of potential pension providers from the Pension Tracing Service. Tom and I quickly got the relevant numbers, and he called each of the three in question.

Crucially, everyone’s National Insurance number is a vital piece of unique information that should be stored with any pension provider that they have a policy with. After around 30 minutes of phone calls, we were able to track down an old Friends Life policy of Tom’s.

Given that we didn’t even know who the provider was when we started this process, having any amount of money in the plan at all would have been a bonus. Friends Life informed a stunned Tom that the plan value was around the £85,000 mark. Tom asked the representative three times for the value, refusing to believe the figure at the first time of hearing.

Eighty-five thousand pounds, that Tom never knew he had. Over the course of a person’s life, £85,000 may not seem like a life-changing amount. But to suddenly “find” this amount, just as Tom was considering a potential step away from employment, was genuinely life-changing for him.

A few weeks later, I presented Tom’s retirement cashflow plan to him. The conversation that Tom and I had at that meeting moved away from simply showing Tom how he could retire - his original objective - to demonstrating that could safely spend more in retirement than he planned to.

He could now not only afford to retire, instantly, but could spend more than he ever thought possible at this stage in his life. We started to discuss an overseas holiday to celebrate his retirement - a complete transformation from his original mindset where he was doubting the viability of stopping work.

I have never been involved with any other client who “found” as much missing money as Tom did. Yet, I have never forgotten Tom’s experience, and the impact that a simple bit of housekeeping had on his and his family’s life.