Many people underestimate the amount of pension admin they have to do to ensure they are giving their retirement dreams the best possible chance of becoming reality. Becky O’Connor, Head of pensions and savings at Interactive Investor, shared eight pieces of pension admin savers should check before the new year.
Ms O’Connor said the period between Christmas and New Year’s Day, is the ideal time to check up on one’s retirement and state pension.
She said: “Besides going for National Trust walks, watching Netflix and eating cheese, it’s a great time of year to tackle some of the things you know you need to do but never quite get round to.
“If you aren’t sure where to start with your penmin [pension admin], follow my top tips to maximise the benefit of that moment where you have a bit more time on your hands for your future retirement.”
Check state pension
The amount of state pension one receives in retirement depends on their National Insurance contributions made whilst they were younger.
Savers are urged to check up on this now to ensure that they are on track to receive the full new or basic state pension when they plan to retire.
This can be done on the Gov.uk website and for anyone that discovers gaps on their National Insurance record, they can top it up with voluntary contributions.
Ms O’Connor said: “You could be pleasantly surprised at your progress, particularly if you worked part time when you were younger. If you are worried you are behind, you can plug gaps in your NI record with class three or class two contributions.”
Check former workplace pensions
There is an estimated £90billion forgotten in old workplace pensions, so now would be the ideal time for people who have recently changed jobs to ensure their pensions weren’t left behind.
Consolidating one’s pensions could be an option for many as it enables savers to more accurately see where they are in terms of pension pots.
Ms O’Connor cautioned: “Not everyone is able to move their pensions though – you might have some benefits or guarantees that prevent this. It’s worth checking this, too, if you have been thinking about moving your pots to one place.”
Organise online logins
Ms O’Connor suggested that savers who are with a provider that offers an app but aren’t using it should take this time to download it and sign in.
She advised: “Do this for current and former workplace pensions. This is one simple act that could help you prioritise your pension next year and beyond.”
Use a retirement income calculator
While many find themselves with plenty of spare time during the upcoming holidays, Ms O’Connor suggested they spend it calculating how much they will need to have the retirement they want.
This can allow savers to see whether their contributions are enough to get them to where they want to be.
Pension and Lifetime Savings Association has suggested savers need £20,800 retirement income including state pension to enjoy a decent retirement income, which is roughly £300,000 in pension savings by the time one retires.
Consider what an ideal retirement age would be
In order to properly calculate how much one should be contributing, they need to first consider when they would ideally like to retire.
Ms O’Connor cautioned that when calculating this, savers should keep in mind that they can only access private pension funds from the age of 55 and the state pension entitlement age could be between 66 and 68.
She suggested savers consider “what you would do if you had to retire early, what might be some of the things that could get in the way or place additional demands on your finances at that time of life, such as helping children with university costs or the need to care for elderly relatives”.
Check pension savings
At the end of a calendar year it’s far easier to analyse how much one can expect to have saved by the time they retire and that they are on track to achieve this goal.
Ms O’Connor added that it “can be surprisingly encouraging” to see the difference a years’ worth of contributions makes.
Ms O’Connor noted: “It’s useful to pull apart how much of the growth has come from investment returns, how much from your own contributions, how much from your employer and how much from tax relief, to give you a better idea of the value of all of these elements of your overall pension.”
She suggested that if one isn’t satisfied with their current pension fund, they should check which investments pulled down its value and promptly shift the focus towards a better alternative.
Consider updating contributions
While reviewing one’s finances for the year, some may find that they had no trouble making contributions and could afford to put away a bit more.
Ms O’Connor commented: “You should especially consider this if you haven’t yet maximised your employer matching scheme. If you put more in, check whether your work will too, and what the maximum amount is that your employer will contribute.”