Seven steps to knowing the pension funds you already have
As a member of your workplace pension scheme, you’re probably confident in how much you contribute on a monthly basis, and what you employer pays into the pot. Most of us will have several employers during the course of a lifetime and that could mean a number of workplace pensions.
This article could help you find those forgotten pensions, as well as help you to get a clear picture of potential retirement income. So, the first step is to find out what you already have in terms of savings. Our seven-step plan will help you to take control of your plans for retirement.
It’s increasingly unusual for people to work for only one employer during their lifetime. In fact, you might be surprised to find that, on average, an individual will work for 11 employers* during their lifetime. This means that you could easily acquire several pension pots from different employers and with different providers. As you can imagine, this can lead to lost savings pots. In fact, the Pension Tracing Service estimates that there could be as many as 50 million dormant and lost pension pots by 2050, and our own research suggests that over 20%** of us have lost track of one or more of our pension pots.
The good news is, it’s easy to locate the pensions you’ve already got, and once you’ve done this it will become much easier to work out how much your savings could give you in the future.
This is a simple step-by-step guide to getting on top of your retirement income and making sure you’re saving enough for the retirement you want.
1. Your State Pension
The State Pension forecast estimates how much you might get from the State Pension based on your National Insurance contribution (NIC) records. It also calculates when you can draw your State Pension (this might be different from when you access your personal pension), how any future National Insurance contributions might grow that amount, and how to increase the final amount – if applicable to you.
It’s even more important to check your NIC records if you've had any periods off work in your lifetime. For instance, due to ill health or maternity leave. You may want to consider plugging any gaps to make sure you'll receive the full amount you're entitled to when you retire.
Do not underestimate the value of your state pension.
2. Locate all your personal and workplace pensions’ details
You should receive a pension statement each year. But if you don’t have the paperwork for any reason, it should be easy to get hold of simply by contacting the pension provider directly. If you don’t have their details, you can use the Department for Work and Pensions (DWP) tracing service – phone 0345 6002 537
Simply search for the name of the company you worked for or the name of the pension plan. The site will give you the pension scheme’s details, and you can then contact the provider for further information.
If neither of the above work, you can contact the company you worked for directly.
Once you’ve located your pensions, you could consider bringing them all together into one pot. Before you do that you should be comfortable with the investment choices that you make as you may lose features, protections, guarantees or other benefits when you transfer. If you’re not sure, you should get financial advice – there may be a charge for this.
Find any lost pots - they might add up to more than you think.
3. Fill in the details
After locating your pension information, check:
- How much are the pension(s) currently worth?
- Are any contributions still being made?
- What are the charges for management of the pension and its investments?
- What income is the pension estimated to pay on your chosen retirement date?
Make sure all your information is up to date.
4. Your nominated loved ones
It’s important that your pension provider knows who you’d like to leave your pension to if you pass away. Is there a person nominated to receive any death benefits?
Make sure the schemes have the right contact details and the details of your nominated loved ones – this will ensure that they will be able to get hold of them, should they need to. Don’t forget, you need to update your provider whenever you change address, or when your personal circumstances change.
Make sure loved ones are taken care of.
5. Work out when you can retire and how much you’ll need
You can do this using our retirement planner which has a handy income-needs calculator. It also has lots more information to help you understand your options – what your income could be, how to get guidance or advice, and how to make your plans happen.
6. Think about how you want to take your pension
Since the rule changes regarding pensions (also known as pension freedoms) came into force, the options for taking retirement benefits have become much more flexible. While there used to be only one option for retirement income (an annuity), there are now many more options to choose from. While this is great news for you, it’s important to understand these to make full use of them.
Our retirement planner will give you more information on your options, including flexible regular income, guaranteed regular income, a combination, or leaving it invested and taking it later.
One important choice that you have is to take a tax-free lump sum, which can be up to 25% of your fund, tax-free, and pensions freedom means that you can access this from age 55, if you want.
Further ‘lump sums’ or income from your pension is subject to tax at your personal income tax rate, so keep in mind that cashing in too much at one time could push you over an income tax threshold. Remember, the money you pay personally into your pension benefits from tax relief, it is only the withdrawals that are taxed.
Planning the most tax-efficient way to access the savings you have worked hard to build is key. You may well have some, or all, of your tax-free personal allowance unused, and it's possible that it could be used against income you take from your pension. As everyone's tax situation is different we can't give you hard and fast rules, but we suggest checking your own limits and thresholds before deciding how and when to access your pension.
This information is based on our understanding of current taxation law and HMRC practice, which may change.
Always consider tax implications.
7. Seek further help if you need it
You should be able to follow most of these steps yourself, but if you need more information or help, contact our Aegon Assist team. This free service provides guidance and the team will be happy to talk you through your options for retirement, and the income you will need to enjoy it.
This service is free and allows you to make your own informed decisions, planning for the retirement you want. However, if you're in any doubt, we recommend you seek professional financial advice, which you may need to pay for. You can find a financial adviser through unbiased.co.uk.
Pension Wise also offers free and impartial guidance to help you understand your options at retirement. You can visit them at Pensionwise.gov.uk or call 0800 138 3944.
Retirement decisions don't have to be made alone. If in doubt, seek guidance or advice either from an independent adviser, your employer or Aegon.
*Meeting future workplace pension challenges: improving transfers and dealing with small pension pots, page 7, Department for Work and Pensions
** Research was conducted by Aegon with the Aegon UK consumer panel. Total sample size was 1,004 adults. Fieldwork was undertaken in October 2016.