Many people never or rarely check how much their pension is. Even if you’re one of the busier types, you might not get much past the “Projected Income” headline.
This is of course important, but there is other useful information about the financial statements that is worth taking a look at.
And if you have an online login, you can make adjustments on the spot that could improve your chances of a comfortable retirement.
That’s why we’ve put together a handy guide for you on how to check whether your work fund is up to date, so you can make the most of just a quick visit to an online retirement account.
How to carry out the pension check: What you should pay attention to when registering
According to a study by financial services provider People’s Partnership, around 16 percent of pension savers have never checked their pensions and 24 percent do so less than once a year.
In contrast, there are 20 percent who check once a year and 11 percent who check every six months, according to the survey of around 1,000 pension savers.
Nine percent of men surveyed said they checked their pensions once a week or more, as did 1 percent of women.
“Many workers are ill-prepared for retirement, which is a concern as we know that millions of workers are not saving enough,” said Kevin Martin, group director of client services at People’s Partnership.
“There are simple steps a person can take to ensure they are better prepared for retirement, including signing up for an online retirement account, naming a beneficiary and ensuring your information is updated so your provider can stay in touch.”
1. Check your employment pension online
This may sound obvious, but the survey above shows how many people never bother.
If you receive a letter every year and it contains enough information to keep track, that may be fine if retirement is still many years away.
What is the difference between defined contribution and final salary pensions?
Defined contribution Pensions take contributions from both the employer and employee and invest them to provide a sum of money in retirement.
Unless you work in the public sector, they have now largely replaced more generous gold-plated ones defined advantage – or final salary pensions, which guarantee a guaranteed income after retirement until death.
Much of the information contained in this guide is worth reviewing or updating, no matter what type of pension you have.
However, it is particularly important to monitor defined contribution pensions as savers bear all of the investment risk, not employers.
However, pension providers have many tools that you can use to check whether you are on the right track. If you are part of a defined contribution scheme you may want to change how much you pay in each month and how your pension is invested.
When it comes to considering mutual funds, you can research the fees, risk levels, and performance to see if you can do better.
“Signing up for an online pension account with your pension provider is a simple process as you will usually only need your social security number and your unique customer number, which you will find in the information pack sent to you when you signed up,” says your pension provider Mr Martin.
“Once set up, you can check the value of your pension fund, change the date you want to retire, change your address if you move and much more, including changing how you invest your pension savings or transferring other pensions .’
2. Review your retirement income forecast
This is just an estimate, but taken together with the forecasts for other pensions and your state pension forecast, you will get a general idea of what your total retirement income could be in today’s money.
Now compare this number with your salary. Keep in mind that some everyday costs, such as a mortgage and travel expenses, may no longer be part of your budget as you age.
An influential metric from industry group the Pensions and Lifetime Savings Association suggests what income singles and couples might need for a simple, moderate and comfortable retirement.
The calculations do not include housing costs, which you will need to factor in if these continue to be a problem.
The income amount shown online or on your annual statement gives you an idea of how much an individual pension will be worth at the specified retirement date if you maintain the same level of savings, says Martin.
“It must always be remembered that this guideline depends on investment performance.” The statement gives you an indication of what your annual income could be.”
The pension income you can secure in retirement is not set in stone and is influenced by factors such as how much you have saved by retirement, says Alistair McQueen, head of savings and retirement at Aviva.
He suggests using one of the many free online retirement calculators to estimate your potential income in retirement, although this amount is only a guide and not guaranteed.
“Is your planned income sufficient? A very common and understandable retirement question is: “How much money do I need in retirement?” “The tricky reality is that the answer to this question will be different for every person,” says McQueen.
Three ways to get your retirement on the right track
Alistair McQueen, head of savings and retirement planning at Aviva, shares three “rules of thumb” he gives to people who want a decent pension in old age.
Forty year rule
Start saving at least 40 years before your target retirement age
Twelve percent rule
Save at least 12 percent of your income in your pension, including money from your employer.
Rule ten times
Accumulate at least ten times your annual income in your pension funds by the time you retire
“A very simple rule of thumb is to aim for an income in retirement that is at least half of what you earned during your working life.”
“It is likely that we will be able to meet our needs in retirement with a lower income because, for example, we have no work-related expenses, may have paid off our mortgage, and will not be paying Social Security on our retirement income.”
Find out here about the pension boosts you can get for free, including increased tax relief and extra cash from your employer.
3. Make sure personal information is up to date
“Pension providers will be in regular contact with you via post or digitally about your pension savings. “It is therefore important that providers have your current contact details such as home address, telephone number and email address,” says Martin.
“These can all be easily updated in your online account.”
4. Add or change your beneficiary’s name
Decide who will benefit from your pension in the event of your death, or change the name if your personal circumstances have changed, for example if you got married or divorced.
“It’s really important for your pension provider to understand who you want to benefit in the event of your death,” says Martin.
“Without this information, the person you want to benefit may not receive benefits and the payment will take a long time. You can add or change your beneficiary through your online account or by contacting your provider.
5. Track down your old pensions
You may have left a trail of pension arrears after changing jobs, so you need to keep track and ensure providers have your current contact details.
It’s a good idea to carry out checks similar to those above on both older and current pots, particularly if you have saved significant amounts with a previous employer.
Consider merging your old pensions, although this may not always be to your advantage.
“It is estimated that there are up to 2.8 million lost pension benefits in the UK. “Look at records or old payslips to find out who the pension provider was that you were previously saving with,” says Martin.
“If you don’t remember or can’t find the contact details, contact the government’s pension search service.”
What else should you know about your pension…?
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