Is it time to think about your pension?

27 September, 2023 / words by Emiley Phillips

‘Pension’ – something we hear about all the time and are probably already involved in, but I guarantee, the majority of us have no idea what this means in the depth we really should – we are all guilty! So here I uncover everything and anything you should know about your pension, to get you thinking about it in the right way!

First things first…a pension is simply explained as a long term savings scheme. It enables you to invest for your future and build some savings for when you are no longer working. Ultimately, the sooner you start saving via a pension, the better! And really, you can never be too early, or late to start!
There are various types of pension:

Workplace Pension

A scheme where your employer and yourself pay an agreed amount of money into your pension pot each time you are paid (one-off contributions can also be paid by yourself). This amount comes off your salary.
Employers are obliged to contribute, and at least offer each employee the contribution, (by which the employee has to opt in or out). The only exception is if the employee earns less than £6,240 a year.
Though there is a set amount each employer needs to contribute, some employers choose to exceed that amount and help you out even more!

Within the workplace pension, the Government can also contribute here via tax relief.

Government State Backed Pension

This is the scheme where the Government pays an amount to the pension pot of those reaching State Pension age. You build your entitlement by making contributions towards National Insurance (of which you will stop paying when you reach State Pension age) through your working life and then the contributions made throughout, will determine the amount you earn from the Government via this scheme.

To claim state pension age, a letter will be sent with instructions 2 months prior. You will not be automatically enrolled.
Note that in some cases you can pay tax on your pension.

Private Pension

These are personal pensions, stakeholder pensions or self invested personal pensions, so schemes you set up yourself with a pension provider. This may be on top of your workplace pension or instead of, if you are self employed. There are lots of options of providers out there, with different offers. It is advisable to do your research and compare offers, to chose the best deal/provider.

Where Does My Pension Go? How Can I Access It?

In a simple explanation, your pension money goes into a virtual pot per say, and the money is invested into the chosen provider/companies cash, bonds, property. Ultimately you become an investor. If your investments do well over time, your pension pot will grow, but likewise if the investment declines in value, so will your pension pot. It is heavily market dependent and this is the risk you take, as with any other investment. Always check with your advisor for the latest information, to ensure you take the most financially prudent decisions.

All well and good but it is now done to you as an individual to know your pension fund, be aware of the pots and accounts set up, how to access them and be prepared for your future. Quite shockingly, around 3 million pension pots are lost in the UK, worth a total of £26.6 billion – you do not want to have your pot one of the 3m! Take action before it is too late (AJ Bell have a great tool to help you which can be accessed here)

You can check your State Pension via Gov.UK. The website allows you to find out how much State Pension you can get, how to increase it (if needed) and when you can access it.

When it comes to checking your workplace pension, your employer should be able to inform you of further details. But typically, you will be provided log in details to the pension provider your employer uses, and from there you can see how much you have got saved, and what is to come going forward. There is something called an annual pension statement which is always useful! You can also see on your payslips how much you have been paying monthly,

If you have more than one employer, and more than one pension pot (as not every employer will use the same provider), then it is most definitely advised to get the details to hand so you are aware and know where the money is and how much too. It is a valuable asset you do not want to lose track of. It is worth looking into or weighing up if you want to combine all the pots into one. You can do this, so that you have a consolidated pension account. Just check all scheme rules and compare the benefits you get so far, to ensure none are lost.

What Happens if I Leave My Job?

If you leave your job then this has minimal impact on your pension. The benefits built up so far in the pension pot remain yours. The pension stays invested as it is. All that will happen is the contributions from your employer and yourself will automatically end.

It may be beneficial for you to communicate in this case, with the pension provider and just update them of the circumstances. It may be that you can continue to pay your part, if you wish to. You will still keep access to your accounts, summaries and documents.

When you move to start your next job, it may be that your new employer will start a new pension pot and contribute as well. This is good! The more the merrier. If you leave your employer and become self-employed, it is worthwhile to look into a personal pension option.
What Next?

Brilliant, you have been saving all of this money, your employer has been contributing and all things are running smoothly…but what happens next?

Ultimately at a set date, normally as you hit the retirement phase of life, you can access your pension pot funds and start using it to fund your life.

At current, the typical age to start accessing and using your pension funds is 65, but some pension plans will allow you to access it early on, from 55 years old (rising to 57 in 2028). Note that if you chose to access your pension funds early on, before reaching retirement age, then the size of your monthly payout will be less, to what it would have been should you have waited.

On a slightly sadder topic, but something to think about, If you die before accessing your pension, it can be accessed by the person you select/your next of kin. It is not always liable to inheritance tax but do check as dependent on the age of death, inheritance tax may be eligible.

To end on a more positive note, depending on the type of pension scheme you are enrolled in, and who your provider is, you may be eligible to take out up to 25% of your pension, free from income tax. It is done by taking a quarter of the pot in a single lump sum! Get chatting to your advisor to see if you can do so.

So, now you know what a pension is, the different types, how you can access it and when and even circumstances if you change employment…ticking all the boxes here for you! A very productive thought about your pension, of which you may continue and take action from.

Particularly, if you are yet to enrol or join a pension scheme, this information should guide your options and hopefully encourage you to take action! Remember – it is only for your future benefit, you will be highly grateful later.

In respect of the information above, this content is only for informational purposes and does not constitute any kind of financial advice.


Emiley Phillips


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