Overwhelmed by pension info? How an adviser can help
This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincolnshire or other local offices.
A recent study by Standard Life revealed that 50% of people feel “overwhelmed” by pension information and two in five people have no idea what to do next with the information they do have. Retirement planning can, indeed, be complex and one key role of a financial planner is to explain it in a clear, understandable way. Below, our Grantham team explain some of the key pension information to know in 2023 and how a financial adviser can help you with the next steps. We hope this content is helpful. If you want to discuss your financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:
01476 855 585
info@casfin.co.uk
UK pensions explained
Think of a pension like a savings account. You store money inside it, set aside for the future. However, it comes with special rules and benefits. In 2023-24, you cannot access benefits in your pension scheme(s) until age 55. Unlike a regular savings account, your pension is not typically invested in cash but in other “assets” like company shares and bonds (often via different “funds”). Most people will build up at least one pension automatically over their careers. Pension contributions are made on your behalf using the PAYE (pay as you earn) system, under the “auto enrolment” rules.
In 2023-24, you need to put at least 5% of your salary into your workplace scheme, with your employer also contributing a minimum of 3%. Over time, the wealth in your pension should build up as your investments grow and benefit from compound interest (“interest earned on previous interest”). You can choose to opt out of your workplace pension, although it is wise to get advice first. If you change jobs, your new employer will likely enroll you on its own pension scheme. This means that you may build up multiple pension pots over your career.
Over time it can be easy to lose track of old pension pots. You can start to find them again using MoneyHelper’s free online tool. A financial adviser can help ensure you find all of your old savings and may advise “consolidating” them into a single pension to keep costs down and help make everything easier to manage. This might involve opening a personal or “private” pension which you control independently of an employer.
Bear in mind that there are different types of pensions. The description above largely refers to defined contribution pensions. These are different from your State Pension, which is retirement income provided by the UK government. The amount you get depends on key factors such as your National Insurance (NI) record, if you defer (and for how long) and the “triple lock” system which raises the State Pension by at least 2.5% each tax year. Some people may also have one or more “final salary” or “defined benefit” pensions. These schemes do not build up a “pot” of savings but rather offer a guaranteed lifetime retirement income from your old employer. Some public service jobs use this scheme, such as the police force and the Teachers’ Pension Scheme.
What do I do with this information?
A lot more can be said about UK pensions which is beyond the scope of this article. What can you do next? A good initial step is to try and understand your own pension(s). Everyone has a unique pension situation due to different schemes, employers, access to funds and decisions. Figuring out where you stand gives you a clearer picture of where you could go in the future. This is where a financial adviser can be valuable. Not only can a professional help you track down all of your schemes, but he or she can also assist with reading through the fine print and give you insight into your options.
Consider making a list of all of your past jobs and any pensions these may have offered. You can try the Pension Tracing Service to locate your schemes. Contacting past employers can also help you with pension information (if they still exist). Remember, many employers in 2023 do not offer their own pension scheme but offer one from an external provider. You can also check your State Pension entitlement by using your Government Gateway account to review your National Insurance record.
There are many possibilities that could arise from discussing with a financial adviser. Perhaps you need to increase your pension contributions to achieve your future retirement goals and lifestyle. Maybe a pension transfer is suitable, or consolidating different pots into a single one. Bear in mind that decisions about your pension may be irreversible (e.g. buying an annuity) and may affect how much money you have in retirement. Given the stakes involved, therefore, you might benefit from the clarity and peace of mind that a financial adviser can offer. You do not need to make these decisions alone.
Conclusion & invitation
If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
01476 855 585
info@casfin.co.uk
