First of all, let’s start with the state pension. If you have been making national insurance contributions you will be building up your pension entitlement. Click on this link to find out when you will be entitled to a state pension and the level of pension you are likely to receive.
Remember, state pensions are always under review and may change in the future.
If you are earning more than £10,000 per year from a single employer then you will have been automatically enrolled into a workplace pension through auto-enrolment. So, check your payslip to see the level of contributions that you and your employer are making.
You may have old pensions from previous employers. Look through your paperwork and make sure that the pension company is aware of your current address. If you cannot find the paperwork try contacting your old employer directly or use the government’s online pensions tracing service.
It is estimated that around £400 million is sitting in pension accounts that people have forgotten about.
For most this level of income will not be sufficient to enjoy retirement to the full, so having a decent amount of savings to supplement the state pension is important.
There are two main types of Pension scheme. Defined Benefit (DB) or Defined Contribution (DC).
Defined Benefit, is sometimes known as a final salary scheme. This is where your employer guarantees a set income for life, based on your years of service and salary. It is usually increased annually to take into account inflation. The inflation link is why some will call this the “gold standard of pensions”.
Defined Contribution, is also known as a money purchase scheme. The contributions are invested and the performance of the investments determines the amount you get in retirement. Generally, you have to save up a larger sum for a decent retirement income with this type of pension.
A Defined Benefit statement will show you how much you will receive annually in retirement.
A Defined Contribution statement will show you the current value of your fund. From the age of 55, these savings can be used to buy an annuity, take out a lump sum or a combination of the two.
Most people underestimate how long they will live in retirement. So it is not surprising that most people underestimate how much they will need to save.
The best way to find out is to sit down with an independent financial planner and create a plan. This way you can also consider other options like moving to a smaller house.
As independent financial advisers, we can work with you to create your own retirement plan. As we are independent our financial advice is unbiased. Also, we look at all the options available, unlike some financial advisers who only work from a limited panel.
Why not arrange a meeting today with one of our financial planners to find out how we can help you. Meetings can also be arranged at a time that is convenient to you. The first meeting is at our expense and is without obligation. Why not give us a call today?
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