Did you know that there is over £400million sitting in pensions that people have lost? 1
On average people undertake 11 jobs during their lifetime which could mean 11 different pensions. This makes it very difficult to work out how much money you will actually have once you retire.
What is the Pensions Dashboard?
Currently the government, regulators, and businesses in the pensions industry are all trying to make the Pensions Dashboard available online from 2019.
Pensions Dashboard will allow you to see all of your pensions at the same time and will show you the values and contact details of each pension and the relevant provider. It will then be up to you to seek advice through a financial adviser in order to review these plans and ensure that they meet your retirement needs.
With the Pensions Dashboard not yet available, it is currently up to you to take action to identify where you may have pensions and then review these plans.
There is a huge benefit in seeking professional advice, particularly if you hold a few pension plans which have not been reviewed for some time, or you are finding it hard to keep up with your pensions.
Why do pensions need to be reviewed?
There are so many different types of pension plans out there, all with different features and charges.
Many of the older plans can be expensive in terms of charges and have very limited investment and retirement options. This means you may not be able to take your pension benefits how you want to at retirement with your current provider.
When the government introduced pension freedoms in 2015 this enabled all pension holders to access their pension in a flexible way, rather than being forced to buy an annuity – which in some cases provides poor value for money and a lack of flexibility. Over the last few years there have been a number of new pension plans developed to take these new freedoms into account. These come with lower charges, a wider choice of funds and more flexibility at retirement such as offering flexi-access drawdown.
Drawdown enables your pension fund to remain invested once you retire and you can access your pension as and when required, rather than buying an annuity. However, this is not suitable for everybody so advice must always be taken – particularly as making the wrong investment choices and drawing too much income too soon can lead to an increased risk of running out of money.
What can be done with multiple pensions?
If you have a number of pension plans, you can make your life easier and keep things simple by reviewing these pensions and ensuring you have a plan that meets your future needs.
This can help to not only reduce future paperwork due to modern systems and improved online functions, but you could also reduce the charges you pay and have access to better features and options. This will enable you to really get to grips with where you are in terms of your retirement goals and whether you need to be taking action, such as increasing your contributions. You can then track your pension pot as it grows.
The impact of pension product charges
Many people are not aware of the impact of charges on their pensions and in many cases the older plans such as Stakeholder pensions have charges of 1% per year or higher.
Providers use these to cover their administration and fund management costs. The current plans on the market vary in costs but if you have a pension pot of around £100,000 it is possible to reduce charges to around 0.40% with some providers, meaning a saving of £600 per year! If you have 20 years until you retire this would be £12,000 that you could be saving by simply reviewing the charges of your pension.
What about ‘do it yourself’ reviews?
Although with advanced technology there are ‘Do It Yourself’ options available, you should tread very carefully when looking at these. Seeking professional advice is of the utmost importance when it comes to pensions to ensure you do not miss any issues and ensure that you have the most appropriate pension plan for your retirement.
Some plans have valuable guarantees attached which can be lost upon transfer and others may carry an ‘early exit penalty’ – so professional advice is vital. Making the wrong choices in pension provider can make a big difference in how much money you have in retirement.
The sooner you start to review your pension plans the better – so please make sure you come and talk to us to see how we can make your life easier when it comes to your pensions.
Contact one of our independent financial advisers on 01329 282882, Facebook, or email firstname.lastname@example.org – we can help you bridge the gap between your current pension pot and what you require to live the retirement you have been looking forward to.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.