By Holly Holland, a beginner on a pensions journey.
Pensions, where do I start?
I have never been inclined to learn about pensions or know more about my own. You know the drill, man in suit comes into your place of work to talk pensions and you sit wondering why all this matters when retirement is so far away and so you proceed to day dream about what you’re having for lunch. I sat in the room thinking this conversation doesn’t apply to me. I was fresh out of University and had just placed my foot on the corporate ladder, why would I want to start talking about retirement and pensions?
The concept and how it’s presented to people is archaic and out of touch. There is so much jargon, paperwork and it is incredibly impersonal. For those unsure, put simple a pension is basically a pot of savings you put away to help support you later in life and there’s a bit to get your head around, including the different types of pension, the different parts employers may have to pay and what your options are for moving / withdrawing them.
During lockdown #3 I have committed to come out of it with a better understanding of Pensions, a world away from my former self (pre-Financielle Playbook) where I had credit card debt, a financed car, a student loan and no login to my online banking. I’ve been researching, developing my knowledge and creating an easy and concise checklist to help us kick start our pension priorities during the Financial Wellness Festival Pensions week.
Dig out all of your pensions paperwork
Many of us don’t know who our current pension provider is, so don’t feel embarrassed if you don’t know! You may have a number of different pension providers from different employers so gathering up any paperwork is key. Pull together all of your log ins and passwords to hand and if you don’t have any, start requesting them from the providers.
If you’ve lost your paperwork then that’s okay, there are 3 organisations you can contact that can help track your pension information:
- The Pension Provider
- The Pension Tracing Service
- Your former employer (if it was a workplace pension)
Identify what type of pensions you have.
There are two forms of workplace pensions: defined benefit and defined contribution. Defined benefit is also sometimes referred to as a final pension salary where you will receive an income based on a percentage of your salary. Defined contribution (the most common workplace pension nowadays) is a scheme whereby you and your employer pay in a “defined” contribution each month. These pensions are invested in shares and bonds, usually under the direction of you, and your pension pot will be determined by how well these have performed. If you have a self-invested personal pension, it is a pension you open directly yourself and again, invested in shares and bonds directly under your control.
Work out how much your total pension pot value is
You can do this by obtaining the cash value of your pension pots from your provider. You may not be able to do this if you have a defined benefit, or a pension like an NHS pension. Instead look at this element as how much it would contribute to your retirement “salary” and what your gap is between that and your desired retirement salary amount.
Have a think about your retirement-lifestyle.
Ask yourself these questions: How much money will you need? Will you be in a mortgage-free position? Do you a plan to be mortgage free? And are you putting enough into your pension to support this lifestyle?
Let us guide you to take the next steps for on your pensions journey for a prosperous future. Join our free community to get some help along the way.