Never checked your pension? Here are some important questions to consider

Your pension is usually an important part of your financial plan, because it is likely to be your main source of income during retirement.

Worryingly, though, FTAdviser has reported that a quarter of pension savers never check the status of their pension.

It’s important to keep a close eye on how your pension is growing because this can tell you whether you are on track for achieving your retirement goals. Without knowing where you are today, it’s much more difficult to understand what your income could be in retirement and, consequently, what sort of lifestyle you might be able to afford.

Read on to discover some crucial questions that could help you to gain a more accurate understanding of how your pension savings are shaping up.

What is your projected annual income in retirement?

A pension income projection can show you how much you are likely to receive from your pension each year when you retire. Your provider can calculate the figure based on your current savings and your contributions as well as assumed investment growth and inflation.

This can be a helpful exercise as it gives you an indication of how close you could be to achieving the lifestyle you want in retirement.

If you find that you may have a shortfall, you can then work with a financial planner to adjust your contributions and find other solutions so you can meet your retirement goals.

What would you like to happen to your pension after you pass away?

According to PensionsAge, 26 million people are unsure what would happen to their pension after they die.

A pension is not covered by your will, so to ensure it is passed on to your preferred beneficiary, you need to fill out an “expression of wish” form. It’s important to note that an expression of wish is not a legally binding document; the decision is ultimately down to the pension provider, but they will normally act in accordance with your wishes.

If you haven’t completed an expression of wish when you die, your pension may go to somebody that you don’t want it to.

You can usually fill in an expression of wish form quickly and easily online, and it could save your family a lot of stress after your death if you have one in place.

How are your pension savings invested?

Your pension provider invests your savings for you and most have a default fund that they use as standard. This tends to be a broadly applicable fund, meaning it’s not designed with your personal circumstances in mind.

Many people leave their savings invested in the default fund without checking. This could expose you to several risks, including:

  • The risk profile of the fund may not be appropriate for you. This might mean that your money doesn’t generate the level of returns needed for you to hit your goals.
  • Your money could be invested in companies or sectors that are at odds with your personal morals and values.

Fortunately, it is straightforward to log in and see how your money is invested. Your provider will usually offer a range of different funds that you can choose from if you’d like to invest your money differently from the standard fund. For instance, if environmental responsibility is important to you, many pension providers offer ESG (environmental, social, and governance) options.

By ensuring your pension is invested in the most appropriate fund for you, your money could have more opportunities to grow, giving you a higher chance of achieving your long-term goals.

What are you paying in fees and charges?

Every provider has its own way of calculating fees and charges, and the cost can vary a lot. This means that you could be paying higher fees for your pension than you might elsewhere.

The first step is to understand how fees are charged on your pension. Most providers will charge an annual management fee to cover the costs of administration. This might be a set fee each year or a small percentage of your savings. Some providers have additional costs or expenses on top of this.

If the fees for your pension are particularly high, you may want to consider moving your savings to reduce fees. This could enable you to reinvest more of your returns and potentially enjoy a larger pension pot later in life.

Do you have any lost pension pots?

Due to the introduction of auto-enrolment in 2012, you could have multiple pension pots if you’ve worked for different employers in that time. This can be challenging to keep on top of; according to a report by FTAdviser, 1 in 20 savers could be missing out on vital funds that are sitting in lost pension pots.

So, as well as reviewing your existing pension, make sure that you check for any other pension pots that you may have lost track of.

You can use the government’s pension tracing service to help you find details of lost pensions. Once you’ve discovered this, make sure to log in and update your contact details. Each time you move house or start a new job, make sure you do the same to ensure that you don’t lose any of your pension savings.

Get in touch

If you’d like to learn more about how much you might need to save to afford the retirement you dream of, or would like help managing your existing pensions, please get in touch.

Please give us a call on 01276 855717 or email today.

Please note

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

HMRC practices and the laws relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Approved by The Openwork Partnership on 12/12/2023.