Reviewing Your Plans
T: 01329 833152 E: enquiries@activewealth.co.uk
Retirement planning is not a one-off task. Once you have started a pension or other retirement savings, you should keep it under review.
- Review your plans regularly
- Make sure you are contributing enough to provide the retirement income you want
- Review your plans if your circumstances change, for example, if you get a new job, become self-employed, marry or get divorced
When reviewing your plans your options may depend on how long you have to go till retirement, whether you have to provide for your partner, and the type of pension you already have.
Ask yourself the following questions:
- How much pension income would I get now and how much would I get if I left it until retirement age?
- Would it be enough to meet my living expenses?
- Do I really need to raise extra cash?
- If so, is there another way of raising what I need?
- What benefits could I be giving up, for example ill-health benefits or death benefits?
- What would the effect be on my State benefits or tax position?
- Would I have to pay any penalties if I unlocked my pension?
- How much would I have to pay in charges to get my money early?
- How much would I have to pay the adviser?
Find out if you’re on track
Are you on target to get the level of income you want in retirement? And has that level of income changed?
How much State Pension might you get?
Get a State Pension forecast from the Department for Work and Pensions (DWP) by completing form BR19.
How much might you get from salary-related occupational pension schemes?
You should get a benefit statement from the salary-related occupational pension scheme you belong to in your current job. This will show how much retirement pension you have built up so far and the amount you might build up if you carry on in the scheme until retirement.
Salaries tend to increase by at least as much as inflation, and sometimes by more, so your forecast pension should maintain its buying power too.
You may also get benefit statements from any salary-related occupational pension schemes you used to belong to in the past. Ask for one if you don’t get one.
How much might you get from money purchase pensions?
Each year you should get a statement from each pension provider including those schemes that you no longer contribute to – ask for one if you don’t get one.
It will show how much pension income you might get, based on the value of your pension fund today, taking account of future payments into your plan; how the funds might grow; future inflation; and pension income from your fund when you retire (usually paid as a lifetime annuity)
This is only an illustration, not a guarantee. Nobody can be certain about future investment returns, interest or inflation.
Unlocking your pension benefits early
If you have a pension fund and are 50 or over (going up to 55 by 2010), you may consider taking your pension benefits before you retire – known as ‘pension unlocking’. Think very carefully before making any decision about taking cash from your pension early.
Pension unlocking is only suitable for a very limited number of people and circumstances.
If you take your pension early, your income will probably be considerably less than you could expect if you waited until your retirement date and you will have less to live on when you retire. You can only use a pension fund once.
Will you have enough?
Once you’ve checked your scheme, if you think you won’t have enough money when you retire, you’ll need to think about ways to increase your pension income.
You can top up your occupational pension in several ways, but the most frequently used ones are as follows.
Additional Voluntary Contributions (AVCs)
This is a pension top-up arrangement run by your employer, sometimes called an ‘in-house’ AVC.
Your employer normally deducts your contributions from your pay. Most AVCs are money purchase schemes. Your contributions are invested to build up a fund. When you retire you use the fund to buy extra pension income.
The amount you can buy depends on:
- how much you’ve paid in;
- how well your investments grow;
- the level of charges; and
- the ‘annuity rate’ at which you can convert your AVC fund into pension income.
Some employers’ final salary schemes have AVC schemes where you can buy ‘added years’. This increases the number of main-scheme membership years you are credited with, so will increase your pension.
Talk to your pension scheme administrators for more information on what your employer offers.
Stakeholder pensions and personal pensions
You can also top up your pension with a stakeholder pension or personal pension. These are separate from your occupational pension scheme and you pay your contributions direct to the pension provider in addition to your occupational scheme.
Topping up your stakeholder pension or personal pension
You can top up your personal or stakeholder pension by increasing your contributions to your current pension.