This week marks Talk Money Talk Pensions Week, an initiative by the Money and Pensions Service which aims to get more people talking about money and pensions. And, as the week gets well underway, Standard Life has suggested some questions which savers may want to ask about their pension.
So, what are the five questions which Ms Laidlaw suggests asking about one’s pension?
1. How can I track down any pensions I might have lost?
“There are an estimated 1.6 million lost pensions in the UK worth around £20 billion. But don’t worry – all you need to know is the name of your employer or pension provider to track a lost pension down. If you don’t have those, you can use the Government’s online Pension Tracing Service,” said Ms Laidlaw.
“If you’ve found a lost pension and you want to make it easier to take control of your savings, you might want to consider consolidating all of your pension pots into one.
“Consolidation isn’t right for everyone so It may sense to speak to an expert to get information on your situation just in case you’re giving up any valuable benefits or guarantees by combining your pensions.
2. What will the state pension give me?
“The reality is the state pension alone is a lot less than the minimum wage salary at around £8,500.
“For most people it’s unlikely this will give you the kind of lifestyle you might have in mind later on in life.
“Taking some steps to boost your potential retirement income now, perhaps by increasing contributions to a private or workplace pension or saving into an ISA, means your ‘future self’ will very likely thank you.
“In simple terms, a modern, flexible pension is a long-term savings plan and a tax-efficient way to save money.
“How much it grows over time will depend on how much you save, how your pension investments perform and how long you’re invested for.”
3. What type of pensions are there and what do they offer?
“Starting with your State Pension, in April 2019 the full State Pension rose to £168.60 a week, up from £164.35. However, the final amount you get will depend on your National Insurance record, and is currently not payable until age 67.
“If you have a workplace pension that means you and your employer are putting part of your salary away now, tax-free, with a view to you being able to enjoy more in the future. The best way to look at this is that it’s deferred pay.
“Then you have private or personal pensions where you choose the provider and make arrangements for your contributions to be paid.
“Both offer flexibility with the investments you can pick.
4. At what age can I start to take money from my pension?
“The State Pension is currently available for men and women at the age of 65 but is rising until it reaches 66 in October 2020 and 67 between 2026 and 2028.
“At the moment, you can take money out of your private pension from the age of 55. But before you take any money out, it’s important to consider if you really need to.
“When and how you take money from your pension is a big decision – it can affect how long your pension pot lasts.
“A quarter of your pension pot is usually tax-free, and you’ll pay income tax on the rest. Taking out more than your tax-free cash limit also restricts the payments you or an employer can make into any of your pensions, reducing it to £4,000 a year.
“This can be a problem if you’re still earning or if you want to still make significant payments into any of your pensions. And remember, you don’t need to take all of your tax free cash in one go, you can spread it out over as long a period as you want.
“If your pension provider knows what your plans are, they can help you by providing relevant information and options for how to invest.
5. How do I know if I have saved enough for my retirement?
“Essentially, you need to save for a portfolio – or pot of money – to last at least what could be 30 years or more in retirement. To make that easier you should be starting early and regularly checking in on your pension pot along the way.
“It’s easy to check your State Pension forecast at www.gov.uk/check-state-pension and there are a range of online tools and retirement calculators or you can pay for professional financial advice.
“To find out if your retirement income will be enough, you have to start by estimating your retirement expenses. Of course, future expenses are hard to predict but to get a ballpark figure take your current standard of living and then subtract any expenses you expect to go away and add in any new ones.
“The Pensions and Lifetime Savings Association (PLSA) has developed new Retirement Living Standards to help us understand how much everyday living and some luxuries cost, so that we have a goal to aim for when it comes to saving for the kind of life we want.”