Pension Review

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If you’re already enrolled for pension or more so if you haven’t yet been, this is the time to really stop and examine your retirement finance plans.

 

Why review your pension?

You by all means need to review your pension at the moment. Different pension schemes in the UK have been negatively affected by factors which range from decline in global markets to national economic downturn among others.

To begin with, large employer schemes which offer final salary based pensions are experiencing massive deficits. It’s even estimated that FTE100s on their own have recorded a deficit of £96 billion. Because of the prevailing monetary shortages, many major employers are resorting to closing their schemes to new as well as existing employees.

Secondly, the public sector is equally bearing the brunt of harsh economic times. Talk is rife that large public pensions will have to be wrapped up owing to rising costs. The Treasury is pre-empting a deficit of £4 billion in this current year.

Personal pensions too aren’t spared of the adverse effects that economic down-spiralling is having on retirement pots. Decline in stocks market is translating into a decline in the value of funds. Most funds have become a quarter less worse than they were two years ago. This is the case in spite of the recent share price rally.

Furthermore, the current economic downturn has forced a number of people to cut or stop making contributions into their pension pots. It’s estimated that 1 in 10 persons has either reduced or stopped paying their pension contributions in the last five years. A recent BBC survey also approximated that half of persons aged between 20 and 60 aren’t making any contributions to their pension pots.

 

It’s a time to act

Given all that is happening as pertains pensions and retirement savings, now is the time to act. It’s time to do something to solve any crisis surrounding your pension, not a time to sit back and do nothing at all or worse still stop making pension contributions. You could at least try and review your retirement plan or do any other thing to salvage your pension.

Below are suggestions of actions you can take steer your retirement plans back to a safer path:

  • PEOPLE WITH NO PENSION

    It’s understandable not to be on any kind of pension scheme. Not everyone can afford to be on a pension scheme owing to factors such as personal finance and so on. Besides this, it’s not always wise to enroll for pension. A case in particular is a situation where you only have a few years left before retirement, a pension wouldn’t be beneficial to you in that scenario since you’ll only be able to accumulate a small amount of savings.

    You however still need to have some plan for your retirement. You can at the very least check with the government departments to ensure that you’re indeed entitled to a state pension. In case you find you’ve got shortfalls, do your best to clear these so that you may get a good pension package in the end.

    In addition, also try and join an employer’s pension scheme if you can. Joining a scheme in which your employer makes contributions too is very advisable. It will relieve you of financial burden while at the same time assuring you of a financially safe future.

    The sooner you join a pension scheme, the better it is for you. Your monthly contribution at a younger age can be lower since pension providers reason that you still have a much longer left to be making contributions into your pot.

    You also shouldn’t be hesitant to join a pension scheme because of the required monthly premiums. Most pension providers nowadays allow some flexibility in regards to monthly premiums. They can allow you to stop and resume payments without any penalty.

  • PEOPLE WITH PERSONAL PENSION

    If you have a personal pension, make a point and ask for a valuation. This will help you make a comparison between the amount you’re likely to receive in the end and your personal expectations. In case you have a shortfall, consult your pension provider or financial adviser to advice you on how to bridge the existing gap.

    You should also try and review your investments so as to ensure that they’re relevant and financially beneficial to your retirement future.

  • PEOPLE WITH FINAL SALARY PENSION

    If you’re on a final salary pension and you do not already know whether your scheme is experiencing a delay or not, enquire with your employer so as to be in the know. In addition to asking about a deficit, you should also go ahead and ask about the impacts it’s likely to have on members. An example of this is the possibility of existing members being told to stop accruing further pension funds.

    Even if the scheme doesn’t become affected by the deficit, you should bear in mind that the rising costs doesn’t guarantee you an affordable scheme in future. You should therefore make efforts to get a top-up pension or additional savings to serve as a buffer against potential shortfalls.

  • PEOPLE WITH PUBLIC SECTOR PENSION

    Most public sector pensions have gotten under threat from unfavourable economic factors. In spite of this, majority of public sector workers are still relying solely on their occupational retirement plan.

    In case you’re in a public sector pension scheme, you should consider entering a second scheme or even topping up your current funds if that is permissible. Least of all, you should also try and regularly review your retirement plan.

  • PEOPLE WITH A DIFFERENT TYPE OF EMPLOYER PENSION

    In case you’re in a defined contribution scheme (a scheme wherein the final payment is determined solely by your monthly contributions) or a stakeholder scheme or anything related, chances of you having been affected by the last two years’ change in stocks value are high.

    Request for a valuation from your pension provider and then check to see the amount of funds you’re likely to receive in the end. Also, seek advice from your financial adviser on how to make up for a shortfall. You usually can do this by making extra contributions to your pot. You can alternatively opt to just enroll in a second pension scheme.

  • PEOPLE WITH SEVERAL

    Because of reasons like job changes and other related factors, many people today have several pension schemes which they have harnessed over time. Some of these accounts may even have been forgotten by their holders or perhaps frozen by a former employer.

    Try and reach out to former employers and ask them about the schemes you used to be in. In addition, try and transfer your small plans into a single plan for easier management and monitoring. A low cost stakeholder scheme is an advisable pension scheme to transfer your small pensions into. Transferring your pensions into one account will also help you assess how much contributions you need to make so as to meet your retirement needs.

    You should however be careful not to transfer all kinds of schemes into another scheme. Some schemes such as final salary based ones are best left where they are.

  • Another consideration

    In addition to reviewing the retirement plan you have in place, you should also consider confirming if you’re entitled to a second state pension. Often referred to as SERPS, a second state pension is intended for employees beyond a certain salary level who aren’t in any ‘contracted-out’ scheme.

    You can check for your eligibility for a second state pension at www.pensionservice.gov.uk.

    Do make an effort and review your retirement plan.