Briefings


Five (easy) steps to pension perfection (Part 1)

Issued: 2 February 2017

 

In our continual bid to help as many people as possible towards having a ‘financially secure and comfortable retirement’, we like to present and comment on any interesting article we see. Here’s one that definitely qualifies – it appeared in The Telegraph during January and lists ‘five steps to pension perfection’ (read the article). In fact, we think it’s so good we’re going to comment on each step over the next few weeks in a mini-series.

It comes at a particularly appropriate time as we’re putting the finishing touches to the ‘Pensions’ section on our website (visit Pensions). There’s a lot of useful information in this section and we hope we’ve presented it in an easy-to-read yet informative way. Our aim is to make the subject of pensions less intimidating so we recommend you visit the website if you’d like more information about what we’re saying here.

The Telegraph’s Sam Brodbeck suggests anyone wanting to get a grip of their pension does so in five steps: 1) make sure you know what you’ve got; 2) boost your contributions; 3) maximise tax relief; 4) match your investments with your plan, and 5) consider alternatives.

When you retire, your income from working will be replaced by an income derived from any pension schemes you have. Obviously, knowing what they are is the first step to managing them effectively as, once you have this information, you can work out the likely income you’ll receive and be able to determine the effect it’ll have on your standard of living.

It’s probable that you’ll receive a state pension so the question to ask is ‘How much will I receive?’ The full State Pension, calculated under the ‘new system’ introduced in April 2016, is currently worth about £155 a week, just over £8,000 a year. To receive that you’ll need 35 ‘qualifying years’ of National Insurance contributions. It’s easy to find out what you may receive by using the ‘Check your State Pension’ facility on the Government’s website at https://www.gov.uk/check-state-pension.

You may have one, or possibly more, workplace pensions. They may be ‘defined benefit’ (aka ‘final salary’) pension schemes which guarantee a regular retirement income, or they may be ‘defined contribution’ schemes that will need to be converted into an annuity or drawdown product if you want an income. You’ll probably be aware of any ‘large’ schemes you have, but what about the smaller ones?

Do you have any private pension plans? Although you should know about most of these, do you have any small ones that you may have forgotten about? You may have opened a small, private pension plan many years ago but, for whatever reason, stopped paying into it. Do you still have the details? How much is it worth? It’s your money and it could become a valuable asset in the future.

You need to try to gather as much information as you can about all the workplace and private pension schemes you know about. A recent survey estimates that one in eight of us may have lost track of at least one pension scheme – the equivalent of around 2.7million policies nationally – and the Government estimates the value of unclaimed pension savings is in the region of £400million. If you think you may be missing something, contact your former employers or use the free Pension Tracing Service on the Government’s website at https://www.gov.uk/find-pension-contact-details.

Once you’ve found everything you have, you can start to manage to it and, at this point, the best advice we can give is that you talk to a suitability qualified, independent financial adviser. Armed with the information you’ve collected they can assess what you have and make recommendations about how best to manage it towards providing you with a ‘financially secure and comfortable retirement’.

One Financial Solutions is here to help you. As independent financial advisers we’ll review your circumstances and help you make a decision that’s best for you. It’s good to talk so please call us on 020 3714 9565 for a confidential chat or ask us to call you by sending an email to admin@onefinancialsolutions.co.uk.