Many of us still have our heads in the sand when it comes to pensions, or find them confusing or lack confidence with them. For example, an estimated 73% of people don’t know how their pension is performing, even though it can make a great difference in later life.
I interviewed Michelle Gribbin, Pension Sales Director at Profile Pensions, to get the lowdown on the importance of pensions and why keeping track of them matters.
There are many ways to save and invest for the future, are pensions still something the average person should focus on?
Absolutely. All a pension is is a savings plan for your retirement. If you don’t have one you’ll have to rely only on the state pension, which would lead to a drop in your standard of living. It’s absolutely key to start paying something in and put some money away for yourself.
Pensions have a number of benefits:
- It’s put away until you’re at least 55 years old (so you can’t spend it);
- There’s tax relief on it, so the government effectively pays some money into it too;
- You get the benefits of growth over many years.
Interest rates are low on savings accounts, and most pensions perform better, especially over time.
There have been lots of changes in the last few years, pensions are more flexible now. You can take the whole lot out at retirement if you want to, or choose drawdown payments, and you can choose to leave it to somebody else if something happens to you.
Start as early as possible – the sooner the better, and remember that anything is better than nothing – to give things time to grow. Try to make sure life events don’t get in the way of planning for your retirement.
Why is it important to keep track of your pension (or pensions)?
People tend to move jobs quite a lot now, and you need to check to see whether these funds are still performing. It’s important because there’s no centralised system that comes and finds you at retirement – it’s your responsibility to keep track of your pensions.
Isn’t it my employer’s responsibility to make sure my pension is performing well?
No. Your employer is in the same situation as you; they aren’t an expert in pensions. It’s their responsibility to get you a pension, but they’re not responsible for the ongoing review of its performance or suitability.
What if I’m a freelancer with a self-employed pension?
You just lack an employer scheme, and it’s even more important [to look after your pension] if there’s no employer contribution coming in. You’ll still need an income in retirement. If you decide to switch to a different pension there’s the option of adding a new sum in to boost it, either as a regular contribution, a lump sum, a bonus or on an ad hoc basis.
Profile Pensions track down old or forgotten pensions for free, and give free, no-obligation advice about how well they’re doing. What do you look for when you’re checking whether a pension is performing well, and suitable for someone’s needs?
The performance is measured against funds of the same type, which could be above average or below average, and we also look at the fund’s charges.
We also check:
- Does it have the new flexibility?
- Can you pay more in if you want or need to?
- Is it better to consolidate several smaller pensions into one fund?
- What’s your attitude to risk, or life stage?
We can show you how much we can likely save you, based on past performance and current projections. For some customers it’s better to stay where you are, for example with guaranteed funds. However, the majority of people are recommended to switch.
Your company only charges a fee for switching pensions, how does this pricing work?
The charges are transparent, and are a percentage of the value of the fund. This comes out of the pension itself, paid via the insurance company, and not out of your pocket.
Many people have low trust in the pensions system generally, and are worried about poor value for money, bad advice and scammers. How can they stay safe?
You’re right to worry – you can’t afford to take any chances. Always use a company that’s regulated by the government. Check their Financial Conduct Authority regulation number, and the individual registration numbers of any advisers. Profile Pensions customers are also protected by the Financial Ombudsman and other bodies.
Any final words of wisdom?
People often avoid thinking about pensions because they’re seen as complicated, but you can end up with nothing in retirement. Sorting them out with financial advice can be more straightforward than you think.
About Profile Pensions
This company isn’t tied to any providers so they can offer impartial advice, and they’re authorised and regulated by the FCA. They can track down pensions you’ve forgotten about, and find £25k on average in missing/forgotten funds for customers using their pension tracing service.
Profile Pensions review your pensions for free and tell you if they can improve your pension or not, with no obligation. In 70% of cases, they have found better pensions for their customers, and only charge if you switch any pensions with them.
Full disclosure: Sponsored post created in association with Profile Pensions.