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On average, we work for just under 50 years, and depending on when we choose to retire, there are still many years to follow that will need paying for — having money to live off is where a pension comes in. A pension is money that is paid out to you regularly in later life.
These are two main pension types:
State pension
A State Pension, aimed at providing the minimum standard of living, is a regular payment from the government that most people can claim when they reach the State Pension age.
Not everyone gets the same amount as how much you get is determined on your National Insurance record, and for many people, the State Pension is only part of their retirement income.
Private Pension
A private pension is where you can save it yourself, or with your employer. A private pension can come in handy regarding saving, usually whatever you earn a certain amount will be taxed, with this type of pension you can save before tax is deducted.
You, or your employer, chooses the provider and makes arrangements for contributions to be paid. You get tax relief on the contributions meaning that Income Tax you would normally pay to the government goes towards your pension instead.
The money in a private pension pot grows largely tax-free, and when you retire you can withdraw up to 25% tax-free. You can also normally access your pot from the age of 55.
How do I make sure my pension is protected for my or my loved ones’ future?
While pensions can usually be bad-mouthed or misunderstood, saving for retirement is more crucial than some might think. This non-exhaustive guide will help you protect and grow your pot of gold at the end of your employment and allow you to live a comfortable life in your retired years.
*Please note that we are not financial advisors and this article is not intended to represent financial advice.
Expression of wish
Fill in an expression of wish form and make sure you keep it up to date. An expression of wish allows you to leave your pension funds to a person or trust you want if you die before you can access the funds. Failure to do so means that the provider/trustee decides what to do with it.
Make sure you keep it up to date as you don’t want to end up accidentally leaving it to someone unintended if personal circumstances change.
Deferring your State Pension
You don’t have to take your State Pension at the current eligible age of 66, you can just not actively claim it leaving it deferred until the following year and so on.
Now, there is one big bonus to deferring and one big negative.
If you defer your State Pension, it will increase every week, as long as it is at least nine weeks. Currently, a one-year deferral would get you an extra £614 annually for life. The negative is that you will have given up just shy of £11,000 in that year, meaning you will have to live for at least 20 years past 66 to break even and start seeing that profit.
If you’re worried about life expectancy then deferring might not be the best option for you, but if you’re willing to take the risk and think 88 is your time to reap the benefits, go ahead. There are more ups and downs than that, but it’s one of the biggest questions people think about regarding their pension.
Keep in touch with your pension pots
Did you know that the amount of money hidden away in old investments and pensions is estimated to be just over £26 billion? You might have had a pension in your first-ever job many moons ago and had completely forgotten about it. Don’t worry about losing out, you can still claim it.
You can use this free pension tracing service to find your lost pension. It won’t tell you what the value is, but it’s still money in your pocket if you find one you forgot about. You might also be able to claim the funds of a close relative that has died before taking their pension. This depends on what type of pension they had and any potential complexities (family rifts, larger sums) there might be.
Accept your ‘hidden’ pay rise
Auto-enrolment is a rule which says companies must opt in their employees aged 22-66 who earn a minimum of £10,000 annually to pay towards a private pension.
When you pay into your workplace pension, your employer must also contribute to your pension savings – on top of your salary. Essentially, if you’ve opted in, you’ve got a pay rise as your employer is giving you extra money you wouldn’t have got, despite it not being immediately available.
If you have opted out of your pension plan you may have more disposable income every payday but in effect, you’re paying a little bit more tax and missing out on your employer contributions.
There is currently a law in its final stages in parliament that means those aged 18 will also be able to opt into the company pension. If you’re over 66 and earn above £6,240, you may be at the State Pension age so you’re not opted in by default, but earning that amount of money means you can request to opt back in.
Transferring your pension
Transferring your pension to another scheme is possible, but it’s crucial to seek advice from a trustworthy financial advisor. If you fall into the hands of an unscrupulous advisor, you could face significant financial losses.
To ensure reliable advice, it’s important to choose an advisor regulated by the Financial Conduct Authority (FCA). This regulation ensures that they follow the rules and provide accurate information. Non-regulated individuals, often referred to as an IFA (Independent Financial Advisor), who claim to have your information may not have your best interests at heart and should be avoided.
Even when dealing with a seemingly legitimate advisor, it’s wise to approach with caution. Be sceptical of promises of higher returns, larger tax-free lump sums, or attempts to outdo your current plan. These are often tactics used in pressure selling, which is a form of financial mis-selling.
Financial mis-selling occurs when the advice doesn’t consider your specific circumstances, such as age, risk tolerance, or financial security. It also encompasses situations where you receive incomplete information about the risks and returns of a pension plan, leading to misunderstandings and poor decisions.
Failure to disclose alternative options, fees (including commission), and inadequate risk assessments are also considered forms of financial mis-selling.
I’ve transferred my pension after not being given all of the information I needed, what can I do?
If you transferred your pension to another scheme, and you feel like you weren’t given all of the information you needed to make an informed decision, you may have been a victim of financial mis-selling.
Whether you know you have suffered a financial loss or not, we are here to help.
Barings Law is highly experienced at claiming compensation for clients who have been mis-sold a pension transfer. We will assess your claim and fight your case against your pension provider for you on a no-win no-fee basis.
For a free no-obligation* consultation with our legal experts click the button below and this will take you to our Mis-sold Pensions claim page.
At Barings Law, your legal concerns are our top priority. Whether you need guidance on a complex legal matter or have questions about our services, our team is ready to assist you.
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