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It’s Pension Awareness Week. Here are four ways to check in on your long-term savings pots and make sure they’re working for you.
In the UK, it’s estimated that 12.5 million people aren’t saving enough to achieve the lifestyle they want in retirement. But why aren’t so many of us contributing enough?
Changes to the types of pensions available to us as employees are a major factor. It used to be the case that Defined Benefit – sometimes known as DB or Final Salary – pensions were the norm.
If you had a DB pension, your employer would promise you a certain amount of money each month in retirement for the rest of your life, calculated based on things like your salary and length of service.
Sounds great, right? Not so much these days.
Sadly for most of us, Defined Contribution – or DC – pensions are now the norm. The big difference here is that you only get out what you put in. While employers must contribute a percentage of an employee’s salary each month, the onus is on members to ensure they’re putting enough in to see them right in retirement.
If the above is news to you, or you have no idea how much pension you’re currently on course to get, then you’re not alone. It also means you’re in prime position to take control this Pension Awareness Week.
Here are five things that will help you get your pension into good shape.
1. How many pension pots do you have?
Most of us acquire a new ‘pension pot’ every time we move job. It’s estimated that the average person will have 11 pensions by the time they get to retirement, and that there is around £26billion worth of money which remains unclaimed.
‘Losing’ a pension is like losing a briefcase of £50 notes, so don’t let this happen to you! The good news though, is this briefcase can be recovered (unlike the one you left on a train, sorry).
If you’re not sure on how many pots you have, as a starting point write down all of the companies you have worked for. From there, you can use the Government’s free service to get contact details for the different providers. The Pensions Tracing Service is another useful site for this.
If you’re struggling to find info on a particular provider, the best thing to do is look for a general enquiries email address for your old employer and ask to be put in touch with whoever looks after pensions.
2. Are your contact details up to date?
One of the most common reasons for pensions getting ‘lost’ is when people don’t update our contact details when moving house (or changing email address and phone number).
If you’ve been able to get online login details for your different pensions by following the above steps, or have phone numbers for member services people, check the details that are on file and update them as needed.
Once you know all your details are up to date, make sure you have updating your pension providers as a key action point for when you’re moving house, changing email address etc.
Consolidating all of your pots into one could make your pension far easier to manage long-term, but that’s a blog for another day!
3. How much is going into your pension each month?
If you’re enrolled into your workplace pension (as all full-time employees will be after three months’ service), the current monthly minimum contribution is 8%. This is 5% from the employee and 3% from the employer.
There’s much debate in the pensions industry as to whether an 8% monthly contribution is enough to secure someone a comfortable retirement, and the general consensus on this is a firm no.
This means it’s worth increasing your contributions as much as you can afford – even a 1-2% hike could make a significant difference long-term.
To view or change your contribution levels, log into your pension provider’s online portal or call their member services team. Your payslip should also show how much is going in each month.
A key point to note is that some employers (not all) will match an employee’s contributions if they go above the minimum amount. If this is something your company offers, then the argument for upping your contributions is even more clear. Who’s turning down free money from their employer?!
4. How much are you on course to get in retirement?
Last but certainly not least, find our how much your current rate of saving is going to get you in retirement.
There are some great free modellers out there – such as Money Helper and LV Pensions Village – which can help you work this out, as well as showing you how much extra you’d need to pay in each month to achieve the retirement you’re envisaging.
Even if you can’t afford to up your contributions right now, you’ll get an idea of how you might need to tweak your budget moving forward.
Some of these tools will even show how small changes, such as bringing coffee from home rather than buying one mid-commute, could help boost your pension saving. You don’t necessarily have to lose money to make money.
So, what are you waiting for? Following these four steps might not see you having your own superyacht in the Mediterranean, but they’ll put you on the path for a comfortable retirement when the time comes.
All ideas expressed in this article are for informational purposes only. If you have a complex pensions-related issue then it can be worth seeking financial advice to establish a solution. Sites such as Unbiased.co.uk list advisers who can help.
This article contains affiliate links. Affiliate links have no bearing on the editorial stance of Mouthy Money, but do help us fund our journalism and information we provide to readers.
Photo credits: Pexels
Helena Jones writes about pensions and financial services. In her free time she can mostly be found chasing after her golden retriever, Cheddar.