There is never a good time to checkup on your pension situation. Normally there is such a long time to go before your pension is due you can always find a reason to defer.
Then the day dawns when you realise retirement and pension needs are just around the corner.
Basic Pension Checkup
- What level of pension do you think you will need to fund the lifestyle you want in retirement.
- Where will the income and if necessary the capital come from. Take stock of your current position!
- ISA savings will produce a tax free income but pensions will be taxable if overall income levels exceed your personal allowances.
- Get a pension forecast to see what your state pension is going to be.
- If you have a personal pension without guarantees assess how much an annuity will provide.
- Pensions may involve some sacrifice now for a more comfortable retirement.
Post Pension Checkup Actions
- Assuming you wish to improve your pension prospects consider actions from the following ideas.
- See if your employer will provide an increased contribution.
- Consider sacrificing some salary to pay in more to your pension scheme. This saves you national insurance contributions and defers taxation.
- Increase your tax free savings and avoid unnecessary withdrawals to build a nest egg.
- If you are approaching retirement look up the rules on income draw down as an alternative to taking an immediate annuity.
- If you have missing years in your state pension consider making good by extra payments.
- It is a sad fact that annuity payments are dramatically lower than they would have been 15 years ago.
- Longer life expectancy, meaning you are likely to be drawing a pension for far longer, is one key reason for this reduction.
- Lower investment returns and financial mismanagement in the industry has destroyed a lot of value and cut annuity returns.
- Generally we dislike new fangled products that treat symptoms rather than underlying causes but you need to check all your alternatives including annuity deferral, income draw down etc.
- Ill health, inflation linking or being the wrong sex can change the level of annuity you are offered. Always seek comparative quotes from other providers.