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Retirement planning made easy
Retirement planning made easy

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4 Taking stock of your pension plans

Now it’s time to see what you’ll get from your own pension pots.

Occupational pensions, workplace pensions or personal pensions are collectively known as ‘private pensions’ to distinguish them from the state pension.

Over your working years you may have saved into many different pension plans. There are different types of pension products and it’s important to understand what you have, as this will affect how it can be accessed and ensure you don’t lose any valuable benefits. This video explains the different types of pensions.

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Tracking all your pensions

The next step in your retirement planning is to get the details of all the pensions you hold, including those you may have joined earlier in your working life.

Tracking down details of all your pension pots can involve a lot of paperwork but potentially is very worthwhile. It is estimated that close to £20 billion sits in unclaimed pensions in the UK, often purely as a result of the current addresses of scheme members being lost (ABI, 2020). So remember to provide your new address to your pension provider(s) after a home move. Whilst the treatment of unclaimed pensions varies between different providers ultimately unclaimed pension savings could in the future be moved into the government’s ‘dormant assets scheme’ and, if left unclaimed, used to help support good causes. Tracking down your pension savings therefore avoids them being used for someone else’s benefit rather than your own.

You can check if you’re a member of a pension plan even if you don’t have the details, by visiting this site: Find your pension contact details [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] . Open the link in a new tab or window so that you can easily return to the course.

Working out what your pension plans are worth

Pension providers should give details of the contributions you have made, and projections for the pension income the plans are aiming to provide.

Many pension providers also have websites to enable members to check their pension details and contributions. Find the details of your projected pension income – this is the amount of money the plan is forecast to provide you, based on certain assumptions.

Defined benefit or ‘final salary’ pensions can give you a more definite projected income, but defined contribution/money purchase pensions will give an estimate. Watch the video again if you need a reminder on this. If you have defined contribution pensions you can estimate the pension income you could get using this calculator: My pension income. Open the link in a new tab or window so that you can easily return to the course.

Also, it’s a good idea to check the age the plan has as your retirement date. You may have provided this age when you started saving, but you might have changed your plans since. This is important as pension providers can change the composition of your pension savings the closer you get to retirement. Usually it makes sense to move the savings into low- risk investments so that there is greater certainty about the value of your pension pot and less risk that the pot falls in value just prior to retirement.

Pension savings are a tax efficient way of saving for retirement as you receive tax relief on your pension contributions. However, there is an annual limit on how much you can save each year beyond which you do not get any income tax relief on your contributions. This limit is quite high, so it will not impact most people. Your pension statements should tell you how much of this annual pension savings limit you have used.

There also used to be a tax charge for drawing on pension savings beyond a limit (known as the ‘lifetime allowance’) on the total size of your pension pot. This tax charge was, however, removed from the start of the 2023/24 tax year. From the 2024/25 tax year the lifetime allowance framework will be fully abolished.

So, to recap:

  • Get the details on all the pension plans you have put money into over the course of your working life.
  • Understand the terms and benefits of your pension plans.
  • Check the retirement age on your plans.
  • Find out what annual income these savings are forecast to provide (and when).

Adding your pension forecasts to your state pension will enable you to work out whether you’ll have enough income to fund the lifestyle you want in retirement.

Next you will explore the options available for turning your pension savings into an income when you retire.