Pensions can be a topic that can make us want to run for the hills, can’t they?! A Personal Pension Review? Stop it now, I hear you say! So, when did you last have one? Hopefully you have been a bit more on the ball than I have with my Pension review. The last time my Personal Pension was reviewed was almost 30 years ago. I was 2 when I set it up!!
So I thought I’d start the New Year with this nice meaty subject! Pensions and a Personal Pension Review! Tackle the tricky subjects first and all that ……………….
As an 18 year old, I was encouraged to take out a Personal Pension by my Driving Instructor. Yep you read that right! The line back then was that there would be no State Pension to speak of for people of my age. I dutifully set up a Personal Pension, and have paid in ever since with the occasional top up, but I’m afraid that’s about as much interest as the Pension pot has got. Rightly or wrongly, I always opted out of Company Pension Schemes safe in the knowledge that I had my pot of gold!!! Oh to be young and wise!
We spend most of our years with no interest in our Pension, let alone spending any time on a Personal Pension Review! Not only is it a rather dry subject but also because we’re never going to get to that age – right?!
But there’s obviously a time when one starts to become a bit more interested. I guess for me, that time is now. Purely coincidental that I happened to have joined The Exclusive 50 Club recently.
So Why Do We Put These Things Off?
I am sure there are many women of my age who, like me, were hot on the property ladder in their twenties while earning good salaries. Staying single until mid-thirties and then settling down and having a family in the mid to late thirties.
Having this financial security meant that as a parent I was able to take on the primary carer role and spend time with my daughter. It also meant that I could take on part-time roles or self-employment that suited our family needs. And things like Pensions, along with many other things, naturally take a back seat as we negotiate our way through the parenting years, don’t they? Busy raising our families, we pay little or no mind to these things.
I’m not sure if it’s just me but these things tend to find themselves on the jolly old pile of ‘Life Admin’ and there they stay. We hear about Pensions all the time and we make that mental note to do something. Over the years we have been opted in and out of SERPS and that is about as far as we get. Sound familiar?
So in truth, I’ve gone from being completely on top of my Pension to feeling ‘a bit green round the edges’. And the longer you leave it the harder it is. We resist taking action because it’s ‘finance’ and we all get a bit cagey about that, don’t we!! Especially when you have to endure all of the ‘part-time, lady of leisure’ comments when you do try to speak to someone. Yes it does still happen and it can make you bloody cynical. It also means that you don’t take any action, especially when they only speak to your husband!!
So, enough of that I thought! Some pension attention is needed.
It’s Time for a Guardian Angel!
Because we all need one from time to time don’t we? My Guardian Angel came in the form of Lauren Boys, Independent Financial Advisor of Brookmans & Berkeley Wealth. We happened to get chatting as is often the way and I had one of those little light bulb moments. We talked about my Pension and Lauren spoke in a way to which I could relate. With my permission Lauren was able to get details from my provider on the value of the pension. That in itself was a big help. If you’ve ever tried to make sense of an Annual Statement, you will know precisely what I mean!
For me, I guess the things that have put me off taking action are :
- Not really understanding
- Feeling a bit uncomfortable about my financial situation
- Concern that I may be a long way off where I should be
I was able to ask Lauren all of those ‘treat me like I’m 5’ questions in order to gain the understanding that I needed and I felt comfortable doing so. I felt that I had more knowledge of my Pension in an hour than I’ve had for my entire life! And the benefit of having the information that we need means that we can make choices.
So, having sat down with Lauren, I thought I’d share some useful snippets that I picked up on the basis that it may just help one other person to go into their archives and see what their Pension is up to.
Obviously, I am at pains to point out that this content should certainly not be treated as financial advice but it is the type of information I would have appreciated reading over the years that might have got me moving a bit quicker.
Personal Pension Review
As it turned out, my pension was in better shape than I thought it would be so that’s always a good start. There are also plenty of years to do something about it or with it – especially as the retirement age continues to increase.
I also learned that :
- There is nothing to stop you transferring your existing Personal Pension to another provider if you wish. The Pension Freedom Act allows more flexibility in this regard. You can change providers as often as you wish to. There may be no exit fee but a new provider will charge an entrance fee in much the same way as a mortgage provider.
- You are not committed to take the Pension on the retirement age you originally stated, it can be deferred if you so wish. You can currently take a pension from the age of 55. This may of course change, given that the age has already gone up from 50. The advantages of leaving the Pension longer mean that it will continue to accrue and it is not subject to taxation.
- Pensions allow you to take a Tax Free Lump Sum of 25% if you wish to take it, while the other 75% can be taken in a number of ways (since the introduction of the Pension Freedoms Act) and not just the traditional annuity route (as a pension).
- It is worth looking at the type of risk fund that your pension is in. Mine is currently in a low risk fund. This is an option that I can consider changing.
- Annual Management Charges vary and again, this is something worth looking at trying to improve. I’m currently paying 0.75% with my existing provider.
- You can pay a maximum of £40,000 per year into your pension or 100% of your income.
- A Personal Pension Review should be carried out annually. Testament to this is the fact that I didn’t have any beneficiaries listed – I was 18 and single when I set the Pension up.
Also, should I wish, I can transfer my Pension to one that offers Flexible Access Drawdown (FAD). The amount that can be withdrawn from a FAD is not subject to any limits and you can choose to withdraw as and when required. Any income amounts withdrawn will be added to the individual’s taxable income in that year. Again, it’s a case of what is best suited to your circumstances.
Things to Consider for Your Personal Pension Plan Review
Lauren also asked some questions that I hadn’t even considered. I’m glad that she did because they are actually very important and very worthy of further thought. Questions like ‘What age do I want to retire at?’, ‘What type of retirement do I wish for?’ and ‘What will be my outgoings?’ are all things to be considered.
Plans can and do change too. We may find ourselves in situations that we hadn’t planned for (ie Divorce among many other things). Obviously, we can’t plan for the unexpected but it’s always good to be on top of things.
As a general rule, Lauren mentioned that one tends to spend more in the early years of retirement while they are still fit and active whereas later in life, health may permit them from doing so.
What is the Current Retirement Age for a Woman?
Also worth knowing!
You can check your State Pension Retirement Age here on the Gov.UK website
And then there are the National Insurance contributions. One of those things you put off looking at in case there is a deficit. Mind you plenty of time to make up for it. If indeed, there should be a shortfall. That’s another one for my list!
But in the meantime, by taking a little bit of action with the right person, I’ve got the information and reassurance that I need to be able to make the decision about what to do next.
I’ll certainly be picking this up again with Lauren now that I’ve got the ball rolling.
So, how about you? Have I struck a chord with this or am I the only one that’s been putting off the Personal Pension Review?
Here’s to our respective Pots of Gold!!
Disclaimer : Any information contained within this post should not be interpreted or used as Financial Advice.