Across the UK last week, Financial Institutions and organisations are took part in Pension Awareness Week 2024, which runs from the 9th to the 15th of September. It’s intended to both remind pension holders to check in on their pension, and encourage those without one to get started.
It also serves as a good time to check your pension details are up to date, ensure it’s still suitable for your circumstances, and boost your knowledge with the wealth of pension related resources.
With that in mind, here’s a crash course from Danbro Financial Planning on getting to know your pension.
Pension Basics
Lets start with the basics: what is a pension, and what are the main different types?
Regardless of type, a pension is essentially savings account to be used for your retirement. The contributions you make before retirement provide an income later on in life, IF you’ve paid in enough to live on, but more on that later.
The main types of pensions you’ll see are:
- State Pension
- Personal Pension
- Workplace Pension
What is the State Pension?
The state pension is the pension payment provided by the government when you retire (if you’re eligible). Depending on when you were born, you’ll either be eligible for the basic state pension, or the new state pension, but in either case the amount you get is generally dependent on your national insurance record.
Its important to note that the state pension is usually not enough to retire comfortably on by itself, but is an additional top up to your overall retirement funds.
What is a Workplace Pension?
Workplace Pensions are plans arranged by your employer, into which both you and your employer pay contributions (if you earn above the minimum threshold). By law, your employer must enrol you into their workplace pension scheme as soon as you are eligible (known as automatic enrolment), however you can usually ask to be enrolled even if you don’t meet this criteria.
While you can choose to opt out, this would mean missing out on the contributions they make, which can have a major impact on your pension pot.
What is a Personal Pension?
A Personal Pension is one you arrange and fund yourself. Alternatively, a financial adviser can help you arrange and manage it.
While they’re often used by self-employed contractors, you can open one even if you’re already enrolled into a workplace pension. You can even have multiple personal pensions if you want to.
You can pay in what you want, when you want, and if you arrange it with an independent financial adviser, you can even choose how it is invested. The investment strategy will depend on your capacity for loss and attitude to risk, all of which an adviser will discuss.
Interested? Get in touch with Danbro Financial Planning for a free, no-obligation chat.
Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested.
When can I access my pension?
A pension is only accessible from the age of 55 (or 57 from 6th April 2028).
When to Start
The simple answer is as soon as you can. As we’ve explained in our article discussing financial planning for young people, compound interest means that the amount of time your money has to grow can have a greater effect on your final pension pot than the amount you put in.
Will My Pension be Enough to Retire on?
A staggering proportion of people aren’t saving enough in their pension to be able to retire comfortably. In fact, Resolution Foundation estimates that as many as 2 in 5 working age people won’t be able to afford an adequate retirement if they continue at their current rate.
We’ve discussed in our blog how getting smart with your pension savings through the power of a sound financial plan can help with this. By working out your goals and the best way to get there, paired with annual check ups to measure progress and ensure suitability, this personal approach aims to provide you with greater peace of mind.
Managing Your Pensions
Whether you’re at the start of your saving journey, or you’re approaching retirement, it pays to know your pension.
This can include keeping track of what pensions you have so as not to lose or forget about them. If you have managed to lose track of your old workplace or personal pensions, you’re certainly not alone, with an estimated £26.6bn of pension funds from 2.8 million lost pension pots being unclaimed in the UK.
However, don’t despair, as there are plenty of services to help you find them. Once you’ve tracked them down, you can ensure they’re working for you rather than just sitting there. Whether that means consolidating them, switching providers, or changing how they are invested, by keeping track of all of your pensions you can be sure your finances are working towards your ultimate goal.
This is where holistic Financial Advice comes in. By establishing a clear plan, you and your adviser will review your entire financial situation every year to keep you on track. Say goodbye to worrying if you’re missing out on a pot of your money, or struggling to keep on top of all your retirement savings, and say hello to Danbro Financial Planning.
It’s peace of mind as a service. Get in Touch Today to see how we can help you.
Disclaimer: The content of this newsletter is for your general information purposes only and does not constitute advice. It is not an offer to purchase or sell any particular asset and it does not contain all of the information which an investor may require in order to make an investment decision. Please obtain professional advice before entering into any new arrangement. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.
Published 24th September 2024
Charlie Sturgess
Charlie is a Designer in Danbro's Marketing team. He is responsible for producing creative assets and content for use across the group's various channels.
His background is varied, having studied Design and English, and worked in the financial services as an administrator.
Outside of Danbro, Charlie can be found up a climbing wall, or watching the F1.
