The closer retirement is, the more important it is to have a clear idea of exactly how much is in your pension pot. It is essential to be prepared for any shortfalls while you still have time to find ways to deal with them.
Your pension savings are not just savings, with a predictable rate of interest. They are investments, and the amount can vary, especially in the early days of your pension saving, when growth rather than stability may be the priority. Hopefully, this will mean that the sum you get out can be substantially larger than the amount you put in – but you need to know for certain.
How can you find out what your pension holds?
Your ‘wake-up’ pack is designed to help. You will get this from your pension provider between 4 and 6 months before your agreed pension age. This can be any age from 55 upwards, but it is usually between 60 and 65. It contains all the details about the amount in your pension pot and should provide the starting point for planning how you will use it to provide the retirement income you will actually need.
If you’re less than 4 months away from your planned pension age and haven’t received a wake-up pack, it’s time to contact your pension provider.
Do you need a wake-up pack sooner?
The problem is that with just months to go before retirement, many people find their wake-up pack comes too late. The Financial Conduct Authority is currently reviewing retirement wake-up packs. They are engaged in consultations which could lead to them being sent from the age of 50 and every five years until people have fully accessed their pension pot. The packs will need to include a simple summary called a ‘pensions passport’ and firms will need to include retirement risk warnings.
It should let you see the options available, and help you shop around to get the best deal for your money – or increase the amount you save to build a bigger pot.
Changes to the rules on wake-up packs will be announced later this year – but if you don’t know what is in your pension pot now, it makes sense to contact your pension provider to find out without delay.
Things become more complicated if you have paid into more than one pension pot, which can often happen if you have changed employers.
Over the course of a career it is not uncommon to have four or five pension plans. Fortunately, if you can’t remember which pensions you paid into you can find a lost pension by using the government’s free online service. You need the name of your employer or a pension provider, and the service can’t tell you whether you have a pension. But it could help you find the providers to contact, making it the first point of call for some very worthwhile detective work that you really need to do.
Making your wake-up packs work for you
It is only when you have a clear view of how much is really in your pension pot or pots that you can start making decisions.
There are several ways to use your pension funds to provide the retirement income you need. Unless you are satisfied that the pension offered by your pension provider really is the best way to use your pension pot, it might be as well to get financial advice. Naturally, at Continuum, we will be happy to provide it.
The value of your pensions and investments, and the income from them, can fall as well as rise and you may get back less than you invested.