Pension Awareness Day is here, but the question is, do you really know your pension? If not, it's time to get acquainted with it, because taking control of your pot could mean the difference between securing the retirement income you want, and suffering from a serious shortfall.
Unfortunately, data suggests that far too few people are fully acquainted with their pension pots, with research from Retirement revealing a worrying lack of pension awareness among consumers. Their figures show that, despite the recent pension freedoms giving people greater responsibility over their finances, 26% of respondents aged 50+ don't know the value of their pension savings – a concerning figure given that consumers at this age are close to needing to turn their pots into an income.
Quite simply, if you don't know the value of your pension savings, you won't know how you can make those savings work harder for you in retirement. You may even find that you don't have the funds available to have the retirement you want, and there'd be nothing worse than realising that fact when it's too late to change anything.
This is a very real problem, too, with 32% of over-65s surveyed by LV= saying that they're living on less than the minimum wage, with their pension savings being insufficient to generate a meaningful income. A further 42% have "gone without" due to tight budgets, with 15% not able to replace household goods, and 5% not even having the funds to afford birthday or Christmas presents for friends and family.
If you don't want to get to retirement only to find that your pension pot isn't as hefty as you were hoping, it's time to take action. Ask for a statement from your pension provider so you can see how much you've got saved and the kind of pot you can expect when you reach retirement, and from that, you can decide what to do next.
If your pension pot won't be as healthy as you were hoping, you may want to start by increasing your contributions. Automatic enrolment has been a great kick-start to encourage more people to save for retirement, but you don't have to stick to the minimum amount – general consensus is that employees should be saving around 12% of their earnings to build up a suitable pot, and while that may be too much for some, anything extra you can put away will be worth it in the long run.
You may want to speak to an independent financial adviser, too, as that way you can see what other options are available, as well as find out how you can turn your pot into an income at a later date. You may like to be more hands-on with your pension investments, perhaps by moving away from the default fund, or you may even want to start paying into a personal pension to create another savings vehicle. Don't forget about cash or stocks & shares ISAs, either – despite stocks & shares versions being slightly more risky, if you can view this form of saving as a long-term investment, you could maximise your tax efficiency to build up a healthy pot when it's time to retire.
Anything you can do to build your pot, or at least understand more about your long-term financial future, could more than pay off in the long run, so use Pension Awareness Day as an opportunity to take control of your pension savings and know exactly where you stand – your retirement will thank you for it!
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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