Do you know how much is in your pension right now? And that doesn’t mean just the amount in your current workplace pension, or a self-invested personal pension (SIPP) with an easy-to-use online login, but the whole thing – all your pots from previous employer schemes, auto-enrolment pension savings, defined benefit pension entitlements and even state pension.
The fact is that very few of us can say we know exactly the size of our pension assets. To get close you need to obtain a balance from each source separately, probably entailing requests for new login details and contacting companies you left years ago.
It’s no-one’s idea of fun and a big part of the reason we are, in general, poorly engaged with our retirement saving.
For too long, saving into a pension has felt like throwing money into a black hole. You kiss goodbye to the money for decades, after which time its value will have grown thanks to tax relief and, with luck, investment growth, but by how much remains a mystery for years at a time.
This does little to help proper retirement planning or encourage extra saving along the way. But there are efforts to change all this.
‘Pensions Dashboard’ is an idea that has been knocking about the pensions industry for a few years. In brief, it would be a way to view all of your pension assets and your likely retirement income in one place online.
That sounds simple, but building it is no easy task because it involves connecting the giant electronic records and systems of several companies, ensuring that information remains accurate and safe along the way.
The plan has the support of the Government and is being led by large pension companies. The hope is that a version of Pensions Dashboard will arrive next year, although there’s still a big question about what that will look like. For example, information about your state pension income won’t feature, at least not at first, which takes away one of the biggest potential benefits of the idea.
Until a full and functioning Pensions Dashboard arrives, there are still steps you can take to get a handle on your savings. Listing all the places where you’ve saved into a pension is a good place to start. From there you should be able to contact your old scheme for a valuation and a breakdown of where your pension money is invested.
You wouldn’t want to do it every week, but it can be a worthwhile exercise every once in a while. Taking stock of your saving at age 45, for example, means that you can understand your likely pension income and whether you need to increase contributions.
To help in that task, Fidelity has produced a set of simple ‘rules of thumb’ to show you whether you’re on track for a retirement income that will maintain the lifestyle you are used to - a common aim for most people.
Via some simple online tools, you enter details such as your age, the age you believe you will retire, the income of your household (rather than simply what you earn alone) and the amount you have saved up to now.
The tools will then factor in details like the state pension to establish how much retirement income you’ll need on top to maintain your lifestyle.
Have a go for yourself and, if you’re still some way off your targets, don’t be disheartened. It’s never too late to make changes that can improve your retirement income, and even small changes can make a big difference given time.
If you want encouragement, another Fidelity tool demonstrates the power of increasing your pension saving by small amounts. It shows what a difference contributing just an extra 1% of your salary now will make to your retirement fund.
The Government’s Pension Wise service offers free, impartial guidance to help you understand your options at retirement. You can access the guidance online at www.pensionwise.gov.uk or over the telephone on 0800 138 3944.
Fidelity’s Retirement Service also has a team of specialists who can provide you with free guidance to help you with your decisions. They can also provide advice and help you select products though this will have a charge.
The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Withdrawals from a pension product will not be possible until you reach age 55. Tax treatment depends on individual circumstances and all tax rules may change in the future. You should regularly reassess the suitability of your investments to ensure they continue to meet your attitude to risk and investment goals. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
Combining your pensions into a Self-Invested Personal Pension (SIPP) can make it easier to manage your savings - and it could be cheaper, with lower fees than you’re currently paying.