I read an article this morning titled:
Women twice as likely as men to be unaware of pension value – Fidelity
You can read the full piece here, but in summary it was saying that some 25% of women do not know the size of their pension pot compared to just 15% of men. It when on to say that 25% of women found the planning process difficult compared with only 16% of men. It did not say whether it was the same 25% that both found it difficult and didn’t know the size of the pot. Students of the science of probability will no doubt bring me up to speed on that. These statistics point toward an increase chance of ending up with a below average retirement income. More worryingly, 21% said they would seek advice on their retirement income from friends and family rather than a qualified practitioner. Getting financial advice from friends and family is a recipe for putting those relationships under some potential strain. If, for no other reason than you can pursue a complaint against a qualified adviser, but there’s no redress against a well meaning cousin, always get an answer to a question or advice on a pension, in writing and from a qualified and regulated practitioner.
Whilst I recognise the disparity between the genders, the fact remains that as a whole too few people are making provision for retirement. When I was actively working in the pension sector, the overwhelming reason that people gave for not putting money aside, was the simple fact that the budget was just not available to do so. There is no simple answer to that problem, although a budgeting technique that many used was to treat their regular pension savings as if it was a bill that had to be paid.
Whilst reading the article, I was reminded of a poem by Robert Frost in which he says
“The afternoon knows what the morning never suspected”.
Just like the afternoon can’t go back to the morning to change anything, we cannot go back a few years to alter our retirement plans. It is one subject for which the phrase “cannot start too soon” makes absolute sense. But before you can even consider altering plans, you need to find out where you stand now.
In my previous post “Do You Know Your State Retirement Age” I provided the links for both getting your date of retirement and your State Pension Forecast. Finding out you current situation from private or company schemes takes a little more effort than using the government calculators, but not that much more, and is well worth it in the long run.
Here is a quick four step guide for finding out where you stand pension wise at this moment.
Get a State Pension Forecast using the government calculator
If you work for a company that provides pension provision, find the most recent pension statement that you would have been sent. Most would have been sent this time of year. If you haven’t got one, contact your employer and ask for it. They must provide you with one by law. Once you have it, read it. If there is anything, and I mean anything, that you do not understand, write it down and ask them.
Write down all the places where you have worked. Some you will know straight away whether or not there was a pension benefit there or not. If there was, have you got a statement from them. If you have moved house, it is quite possible that they do not have your current address. If you haven’t got a statement, or the one you can find is quite old, write to the employer and ask for one.
When you write asking for a statement, address it to the HR department (or equivalent) and mark the envelope “Staff Pension Enquiry”. It is more likely to get to the right person if you do. In the letter you need to include the following:
- Your Name
- Your current address
- Your address at the time you were working there
- The dates (approximate if necessary) that you worked there
- Your Date of Birth
- Your National Insurance Number
Once you have got all of these together. Add them up. This should give you a basic idea of the amount you are likely to get. It is probable that the pensions will be of differing styles and the calculation of each maybe slightly different, so it can be safely said that the resulting figure is not going to be exactly accurate, but it will be close enough for you to start thinking about what you might need to do to get the income you want in retirement.
It is at this point that you can decide whether it is worthwhile approaching a IFA for advice on how to make the best of what you have. All IFA’s will initially talk to you for free and will say whether its worth paying for professional advice or not regarding your ongoing planning strategy.
Figures obtained by the Prudential indicate that one person in seven will retire this year without any additional pension other than the state pension. The vast majority of the remainder will experience a shortfall in income from what they are expecting. Regardless of your age or gender, there is no better time than now for starting the planning for your retirement.