5 important things to check this Pension Awareness Day

Thursday 4th November is Pension Awareness Day. We’ve got a load of pension-focused content lined up for you over the next week, but today, to kick things off, we’re looking at how you can review your pension. If you’re guilty of ignoring such things, a review can help make sure you’re on track for the retirement you want.

Here are the five most important things to check.

1. How is your pension invested?

The money held in your pension is usually invested. This provides an opportunity for your savings to grow over your working life. Over the decades you’ll be saving, investing your pension contributions can really add up. It means you could look forward to a more comfortable retirement.

So, understanding exactly how your money is invested and how it’s performing is important.

If you haven’t selected how your pension is invested, it will usually be through your provider’s default fund. Contacting your company’s Payroll department is a good place to start in finding out who your provider is and how to contact them, if you aren’t sure what you’ve done with the paperwork.

Many providers offer a selection of funds for you to choose from. The funds will have different risk profiles and criteria. Going through the different options with your goals in mind is useful, and we’re here to answer any questions you may have.

When reviewing investment performance, keep in mind that you should focus on the long-term outcomes, rather than short-term fluctuations.

2. Are you claiming all the tax relief you’re entitled to?

When you contribute to a pension, you can often claim tax relief. This means some of the tax you would have paid is added to your retirement savings. It can deliver a valuable boost to your pension.

Assuming your contributions are below the Annual Allowance, you can claim tax relief at the highest rate of Income Tax you pay.

Your provider will often collect tax relief at the basic rate of 20% automatically. However, you should check this is being added to your contributions.

If you’re a higher- or additional-rate taxpayer, you will usually need to complete a self-assessment tax form to claim the full amount of tax relief to which you’re entitled. Speaking to a financial adviser or accountant can give you a good idea as to whether you fall into these brackets.

3. When is your retirement date?

Often, pension providers will change how your savings are invested as you near your retirement date. This will usually mean taking less risk to reduce the chance of volatility affecting your retirement plans.

As a result, you should check when your retirement date is set for. This is often linked to the State Pension Age; however, you may plan to retire sooner or later than this. It’s therefore vital that you set your retirement date for when you actually plan to retire.

In addition, changing your investment strategy may not be right for you as you near retirement. For example, if you plan to use other assets to fund your lifestyle initially, you may want to maintain your current risk profile for longer.

4. What income is your pension projected to deliver in retirement?

While you may know how much is going into your pension each month, it can be difficult to understand what this will mean for your retirement income. This is particularly true if the money is invested.

If you have a defined benefit (DB) pension, you will know what income it will deliver and when. This is normally dependent on how long you’ve been a member of the scheme and your salary.

However, if you have a defined contribution (DC) pension, you will need to factor in how the value of your pension could change during your working life. Your provider will give a projected value, but keep in mind this isn’t guaranteed.

You will also need to consider how you’ll use your pension to create an income for the rest of your life, assessing things like life expectancy and one-off costs.

Calculating the projected income of your pension now means you can make adjustments if you could face a shortfall. If you’re not sure where to start or have questions about your retirement income, we’re here to help.

5. Are you maximising contributions from your employer?

If you’re employed, your employer will usually be contributing to your pension on your behalf.

Under auto-enrolment rules, they must contribute a minimum of 3% of your relevant earnings. However, some employers may contribute more as a perk, so it’s worth checking if you’re maximising what’s on offer.

Your employer may increase their contributions in line with yours, for instance. While this would mean you need to contribute more to your pension, it also boosts how much is being added to your retirement savings too. As these additional contributions are typically invested, they can deliver a significant boost to your retirement savings over the long term.

Checking your employee handbook or speaking to your employer can highlight how you could maximise employer pension contributions.

Contact us for a full pension review

Getting to grips with your pension is essential for reaching retirement goals. If you have questions about your pension or how it could create an income in retirement, we can answer them and carry out a review that you can have confidence in. Get in touch today.

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

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances. Levels, bases of and reliefs from taxation may change in subsequent Finance Acts.