Pensions – Does Size Matter?

23rd October 2017

It’s a sad fact that many more people have less favorable pension benefits than those who have enough or more than they need.

So, “Does Size Matter”?

Without stringing it out to encourage you to read on, in short, the answer is yes!

Size Does Matter!

When I say size, I am in fact talking about the size of your pension benefits. This might be the accumulation of years in a final salary scheme or the size of your pot in a personal pension.

The truth of the matter is the longer you have been in a pension or the bigger the pot, it’s more likely to serve you better in retirement than the alternative or at least afford your more options.

With the introduction of auto-enrolment or work-based pensions, we are all encouraged to save more towards our own retirement. Although, for many being auto-enrolled will be their first pension.

Even though auto-enrolment started in October 2012 many individuals may have already accumulated a number of different pension plans through older company schemes.

Many larger firms have been forced to close their old schemes in favour of the new workplace pension as they either don’t meet the new rules or have become so expensive for them to run it has created a big black hole in their company balance sheet.

How do you compare?

The Financial Conduct Authority (FCA) recently published a report after surveying 13,000 people about their pensions savings. They warn that a third of all workers or 15 million people still aren’t saving “enough” towards their pensions.

According to the Department of Work and Pensions (DWP) the average weekly household income in 2015/16* was £481. A household is considered in relative poverty if its income falls less than 60% of the average income or £288.60 per week.

For those relying solely on the state pension, which currently stands at £159.55 per week, allowing for 35 qualifying years, this falls significantly short of the relative poverty line. Even with two full state pensions (£319.10 pw) being claimed, it will force at least one member of the household to work into their 70s or even 80s to make ends meet.

It’s what you do with it that counts!

The crux of the matter is very few people who own a pension review them on a regular basis.

Annual reviews are crucial to delivering the best outcome at retirement, without regular monitoring of your plans, your chances of a comfortable retirement could be reduced.

After all, we review other areas of our lives, car MOT, home and car insurance even the dentist and yet many believe the advice they took 5, 10 or even 20 years ago still stands well today.

Do you have pension envy?

Our 3-step guide will help you better understand what pensions you have now and also ensure your pension provider knows what to do should something happen before you are able to make any changes.

  1. Know where all are your plans are (Pension Provider)

By knowing who currently looks after your pension will allow you and them to keep in touch. Many people forget to tell their providers they have moved house or even changed their name due to marriage or divorce. By keeping on top will help them keep you up to date with your pension and save time when you retire. It will also help the executors of your Will to quickly administer your estate in the event of death.

  1. Update your death nomination forms to reflect your current wishes.

With recent changes to pension death benefits, it’s even more important that you keep this up to date. As the saying goes,

“Death never takes a wise man by surprise; he is always ready to go.”

 The most common reason for a change is marriage or divorce.

  1. Ask for current fund values and projections to your selected retirement age.

To get where you want to be you first need to know where you are!

A pension provider will write you annually with your pension value, many will also compare it to last years value.

By using online calculators like ours will help you better understand your benefits and if your fund is on track.

Do you want more?

Whilst there is no guarantee taking financial advice will increase your pension, reported on a survey conducted by the International Longevity Centre UK (ILC-UK) ** who tracked the wealth of people who received financial advice versus those who don’t.

It concluded that those who took advice accumulated 16% more on average in pension assets than those who took no advice. In cash terms, they were on average £40,000 better off during the survey period.

With only 6% of pension owners taking regulated financial advice many are missing out on the extensive knowledge and experience which could be the difference being able to retire sooner rather than later.

Author – Mark Truman B.Sc (Hons) 

If you liked this article and would like to know more please get in touch.

*DWP Financial Year 2015/16 Published 16 March 2017

**Survey conducted between 2001 and 2007.

This article is not advice.