Don’t put off sorting out your pension until it’s too late
When it comes to saving for old age, too many of us bury our heads.
There always seems to be something more pressing… until it’s too late.
But there’s no need to let your golden years turn into a damp squib.
With our guide, your pension will be back on track in no time.
PUT YOURSELF IN THE PICTURE
Dig out statements for your pension plans or call your provider to see what you have in your pot.
You will need to look at the most recent valuation of what the fund is worth should you cash it in.
Since most plans are stock market-linked, the amount could change. But this will give you the best indication.
What you need depends on your expectations. Research by Which? found retired couples need £18,000 a year on average to cover household essentials.
This rose to £26,000 when allowing for extras such as holidays and leisure activities.
SPRUCE UP YOUR INVESTMENTS
It’s not enough to make your investments and hope they pay off. Ditch funds bogged down by long periods of poor performance and high charges.
It is worth checking why the fund is underperforming. Poor returns could be a result of a downturn in the market, rather than poor management.
TRACE YOUR STRAY POTS
Losing track of a pension is extremely common. At the last count, there was £3 billion of unclaimed savings. Pension provider Aegon says more than 6.6 million people may have lost one or all of their pension pots.
For workplace schemes, the Pension Tracing Service can search pension scheme administrators to reunite you with your money.
Write to Pension Tracing Service, The Pension Service 9, Mail Handling Site A, Wolverhampton, WV98 1LU or call 0345 6002 537.
Or use the online service here.
For personal pensions call The Pensions Advisory Service on 0300 123 1047.
If all your arrangements are in hand, don’t lose track in the future. Notify pension providers when you move house.
Retired couples need £18,000 a year on average to cover household essentials This rises to £26,000 when allowing for extras like holidays and leisure activities
EVERYTHING UNDER ONE ROOF
Once you have rounded up your pensions, you may want to combine them into one plan.
It cuts down on paperwork and might also save you money. Many older-style pensions have complex or expensive charges which eat into returns.
Moving to a more modern and cheaper scheme means you can pocket more of the gains.
However, some older schemes have benefits such as guaranteed payout rates. Others charge if you switch before retirement. Investigate first and take independent advice if unsure.
BOOST YOUR SAVINGS
If you can afford to pay in more, do. Often, when you increase contributions to a workplace scheme your boss will match what you pay in.
Otherwise, plough money into a private pension, for example a self-invested personal pension (Sipp). Shop around to find one that suits you — try comparetheplatform.com.
Once you have rounded up your pensions, you may want to combine them into one plan
IT’S NEVER TOO LATE TO START
If you’re in your 50s and worried that you’ve missed the boat, don’t despair. It’s harder to grow a huge fund, but the tax breaks are worth having.
When you pay into a pension you get a refund of the income tax that you’d owe. You pay tax when you take the money out.
Typically, in retirement you drop into a lower tax band — so you’ll save money. And you can take 25 per cent of the pot as tax-free cash in retirement.
ROLL WITH THE UPS AND DOWNS
This year’s stock market turbulence had investors worried about a downturn. But pensions savers should keep cool.
It’s important to monitor your portfolio, but the point of buying funds is to let professionals worry about the market.
Remember, you’re investing for the long term. Even if you’ve only a few years until you start drawing your pension, you are likely to need it for another 20 in retirement. So it’s likely to stay invested for many years yet.
Changing your portfolio too often is unwise because you incur extra charges and can do more harm than good.
ASK A PRO TO HELP
The way you divide up your retirement savings between shares, cash, bonds and property is crucial.
If you need help with this, or any aspect of retirement planning,use an adviser.
Find local independent advisers at unbiased.co.uk, or call 0800 023 6868. You can also visit vouchedfor.co.uk, which includes reviews for advisers.
And don’t forget to check what you will get from your state pension.
To receive a statement, call 0345 3000 168, click here, or write to The Pension Service 9, Mail Handling Site A, Wolverhampton, WV98 1LU.
Are you saving enough for the retirement you want?
Saving enough into your pension is vital to ensure you have enough money to live the life you want in retirement.
But how much is enough?
Our calculator, powered by Fidelity, allows you to put in the value of your existing pension pot, salary and monthly savings to see if you are on the right track.
It works out your projected income, or pension pot, uprating your earnings for inflation-linked wage rises and showing what percentage of your earnings you could hope to have as a retirement income.
It uses modest projections for market performance, modelled by Fidelity’s investment experts, hopefully you will do better than this and your pot will grow even larger.
Try the tool out below.