Do you know how many pensions you have? Can you locate your online account(s) easily? Many people do not know these answers. Nor do they necessarily know what the value of their pension is, or where the funds are invested.
Keeping track of your pensions is vital to building long-term wealth and moving you towards your retirement goals. In this guide, our Teesside financial planners explain why pension management is so important – and offer ideas about how to do it effectively.
Please contact us for more information or to speak with a financial adviser:
t: 01228 210 137
e: [email protected]
Why tracking your pensions matters
In practice, many human beings live their daily lives on the principle: “out of sight, out of mind.” Earlier in your life, for instance, it is easy to forget about pensions and retirement because they do not seem to affect you in the present. Yet they will almost certainly matter to you in the future.
This is even more important when you consider that your present actions, and money habits, affect how much pension income you will eventually have. Sadly, it is not true that the government will pay for your lifestyle when you retire. You will (hopefully) receive some income from the State Pension, but this is very unlikely to cover all of your expenses.
Pensions can also affect your loved ones in the here and now. For instance, what happens to the money in your pension if you die prematurely, during your career? Most pension scheme administrators will require that you fill out a “death benefit nomination form”, to direct your savings towards certain beneficiaries.
However, if you have neglected to fill out these forms (e.g. due to losing track of old pensions), and/or your nominations are not up to date, then your loved ones could lose out.
Finally, losing track of your pensions can hurt your finances in the long run. Perhaps you are invested in funds with excessively high fees. Maybe the fund choices from your schemes are limited, or your investments are not performing. These factors can add up to lower real returns and, therefore, a lower retirement income in the future.
By having a clear view of your pensions, you can identify issues like these and put measures in place to address them. There are many ways this can be done, depending on your goals and circumstances. Perhaps it involves combining certain pensions into a single pot, for easier management (pension “consolidation”).
Keeping track of your pensions
The first key step is to ascertain how many pensions you have and where they are located. Make a list of all of your past employers. Did all of them provide a pension to you? If so, do you recall the details of the scheme provider?
A useful tool here is the government’s Pension Tracing Service. If you do not have the details you need, or you have lost them, then this can help. It may not find everything you need. For instance, if you spent a long time working overseas, then the PTS may not have a foreign scheme provider on its database.
A financial planner or adviser can help you in this process of tracking down old pensions and gathering the necessary information. He/she will know in which places to look, what questions to ask scheme administrators, and how to interpret the findings so you can understand them.
After this process, you might discover that you have multiple pensions. Some people have twelve or more! This is common since a UK-based employee is typically enrolled on the organisation’s own pension scheme when starting a new job (under the “auto enrolment rules”). People change careers quite often in the modern workforce, thus leading to many pension pots.
This can make pension management quite difficult. After all, how are you supposed to analyse your investments effectively and regularly in each scheme? To save time and confusion, many people find it easier to consolidate some (or all) of their pensions.
Pension consolidation is a complex and delicate process. For instance, different schemes may have different rules for members transferring/exiting into another scheme. Some may impose penalties for doing so. Certain schemes may be worth holding onto due to the specific benefits which they offer. Also, where you should consolidate your funds? Should you concentrate everything into an old pension, or a new one?
This is where a financial adviser can be very helpful. Getting expert insight and information provides clarity and peace of mind about your options. Bear in mind that your decisions on these issues will likely have a big impact on your future retirement. It is worth speaking to an expert to ensure you have the necessary details, allowing you to make educated decisions which you will not regret later.
Once your pensions are appropriately organised, it is then a matter of managing them effectively going forward. For example, making adjustments to your asset allocation once or twice a year so your mix of equities, bonds or other investments continues to reflect your long-term strategy. Again, working alongside a financial adviser can help you make the best choices over the years.
If you would like to discuss your financial plan and retirement strategy, then we would love to hear from you. Get in touch with your Financial Planner here at Vesta Wealth in Cumbria, Teesside and across the North of England.
Reach us via:
t: 01228 210 137
e: [email protected]
This content is for information purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult your Financial Planner here at Vesta Wealth in Cumbria, Teesside and across the North of England.