How “pension aware” are you?
This might sound like a silly question. After all, everyone knows what a pension is, right?
But are you getting the most out of your pension? Do you know how to combine pension pots? And do you know how your pension is really invested?
Pension Awareness Week live shows
Pension Awareness Week, brought to you by Pension Geeks, Pension Attention, Money Helper, and the Department for Work and Pensions runs from 31 October to 4 November. As part of the campaign, there will be free online shows (or “webinars”) on a range of pension topics each day.
At a time when the cost of living is wreaking havoc, the event aims to empower you with the straightforward advice and information you need to protect your money and your future.
Free daily webinars
Each day, there are three webinars tackling a variety of pension and retirement topics, from “How much pension do you need?” to “How women can better their retirement?” and “All you need to know about combining pension pots and finding lost pensions”.
Each 45-minute webinar aims to answer your pension and money questions, as well as give you budgeting advice and savvy saving tips. You can also join the live chat and ask questions during the shows.
£37 billion locked away in old pensions
It’s estimated that around £37 billion is locked away in old pensions!
So, this could be the time to find out how to locate lost pensions. There will also be advice about how to combine pension pots so you can keep better track of them.
Government advice
There are lots of resources about pensions on the government’s website that are worth checking out. You can:
Our 3 pension top tips
1. Leverage the LISA
If you’re under 40, a Lifetime ISA (LISA) could be a simple way to give your savings a boost.
Available to anyone aged between 18 and 39, you can save up to £4,000 a year towards retirement (or your first home) and the government will add up to £1,000 in cash. That’s a 25% bonus on top of your contribution.
You can contribute up to £4,000 every year until you are 50. Even if you can’t afford to contribute the full amount, you’ll get a state top-up of £1 for every £4 you save. You’ll also earn tax-free interest on any savings.
It is worth bearing in mind that (unless you use the money to purchase a first home) you can only access your cash when you’re 60 years old, so it is a long-term investment.
2. Reflect on your retirement
“Retirement” doesn’t mean one thing anymore; it means different things to different people.
The “Pension Freedoms” legislation announced by the government in 2015 paved the way for more flexibility, including the opportunity for anyone over the age of 55 to take 25% of their pension as a tax-free lump sum or a series of tax-free lump sums. For some people, this has meant the possibility of retiring early or staggering their exit from work.
The key is to work out what matters most to you, so you can start visualising life in retirement. Think about the kind of things you’d like to spend your money on. Jot things down as you think of them and add an approximate value along with other expenses that are likely to continue into retirement.
You might want multiple holidays a year. Perhaps, you’ve got a regular hobby, favourite sport, or membership you’d like to invest in. Maybe you want to eat out at your favourite restaurant every week.
The most important thing is to have an awareness of what your dream retirement might cost, so you know where you’re headed. Then, when you’re ready, you can start to plan.
3. The State Pension
The State Pension isn’t something that should be looked at and reviewed alone. It’s important to assess it alongside your retirement plans, private pensions, and other (possibly non-pension) provisions.
For example, it could boost the income you’ll receive from a final salary pension, allowing you to meet aspirations that you previously thought were out of reach.
Alternatively, you may have decided to access a defined contribution (DC) pension through drawdown. The State Pension might mean you can reduce withdrawals and still maintain your lifestyle, helping your private pension go further, and perhaps allowing you to leave a legacy for loved ones.
Understanding your State Pension and the stable income it will deliver for the rest of your life can provide confidence as you plan retirement too. It’s a safety net that can ensure essential outgoings are met and help you achieve the retirement lifestyle you’ve been looking forward to.
Get in touch
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Please note
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.