If you are an employee, you almost certainly have a pension.
Your employer must pay into a pension scheme for you. They will also make a deduction from your wages to go into your pension pot. When the time comes for you to retire, you could draw on your pension pot to provide an income—provided the appropriate provisions have been made to support your retirement goals
So, does that mean there’s no need for you to do anything more about your pension?
Sadly, no. There’s a great deal you need to do. And you might need some expert help to do it.
Your pension is your future
An employer’s pension is well worth having. It is like a large chunk of extra salary, although you can’t get your hands on it until retirement rolls round.
In fact, it is better than salary in one important way. Not only does your employer pay into it, so does the taxman. If you are a basic taxpayer, tax relief means that every £8 contributed to your pension becomes £10. If you are a higher rate payer, it only takes a £6 contribution to add that £10.
This tax relief means that your pension could easily be the most prudent investment you ever make.
But it might not be enough to provide for your future and a retirement that could last 30 years.
You need to know what your pension is worth
To understand how much income you need in retirement, and whether your current pension arrangements can provide it, you need a detailed financial projection. Look at the cost of living now, the likely effects of inflation, and how long your retirement could be. Remember, life expectancy is now around 79 years for a man and 83 for a woman.
Not only will your pension income need to last for at least that long, you may need to consider the costs of care in your later years.
A financial adviser can help you look at the likely costs you’ll need to cover, and whether your pension pot is likely to be large enough to cover them.
You need to know how to make the most of your pension
Many pension pots fall short. But there are solutions Whether it is looking at ways to make savings work harder, boost the amount you save or delay retirement for a few more years, there are strategies that can help you.
- You might need to consolidate several older pensions into one more efficient pot,
- You might need to shop around for the most suitable annuity
- You might want to set up a drawdown, where the bulk of your pension pot stays invested with the aim of growing larger.
- You may need to look at the rules on drawing a tax-free sum
Your financial adviser can help you find the strategies which could help to increase the size of your pension pot – and increase the income you can draw from it.
You may need to boost your pension prospects
It may be that a combination of an employer’s pension and state pension is not going to be enough.
Again, all is not lost, and if you have a few years to go before retirement, you could boost your prospects with a private pension. This can run alongside your employers’ pension and enjoy the same tax relief advantages.
It can be a basic stakeholder pension plan. These are low-cost schemes that let you contribute to a shared fund which is managed for you. Or you could open a self-invested personal pension or SIPP, which lets you decide how your contributions are directed.
Your financial adviser can help you decide the scheme that’s most appropriate for you, find a suitable provider and set everything up.
You certainly need some expert help
Pensions can become complicated, with rules and regulations, and with the need to protect your pension from scammers who could steal it.
Getting expert help from a financial advisor you can trust is essential.
At Continuum we are independent advisers, which means we have your interests as our focus, and no need to push the products of a particular provider
The simple way to get help with your pension is to call us at Continuum.
Latest life expectancy stats remain below pre-pandemic levels | Centre for Ageing Better
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to a particular retirement strategy and you should seek independent financial advice before embarking on any course of action.
A pension is a long-term investment; the fund value can go down as well as up and this can impact the level of pension benefits available. Pension Income could also be affected by interest rates at the time benefits are taken. Pension savings are at risk of being eroded by inflation.
The tax treatment of pensions in general and tax implications of pension withdrawals will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future.
Levels and basis of reliefs from taxation are subject to change and their value depends upon your personal circumstances. We recommend that the investor seeks professional advice on personal taxation matters.
The Financial Conduct Authority does not regulate taxation advice.
