Updated 03 December 2020
Tired of the same old diets and detoxes? Then itâs time to try something completely different. Whatever your age, let 2016 be the year you get to grips with your pension â because youâll thank yourself in years to come.
Thereâs nothing like a New Year to remind you of the passage of time (whoâs written the wrong date on a cheque already?). Every year brings all of us closer to retirement â but if the thought of getting older makes you gloomy, remember that each year also makes your pension grow a little bit more. When it comes to saving for later life, time is your best friend â so make the most of it. Whether retirement is near or far away, there are always plenty of things you can do.
Okay, itâs the obvious one. If youâre in work then you need to have a pension â itâs as simple as that. If youâre self-employed, talk to a financial adviser about finding the best personal pension for you. If you work for someone else, youâre entitled to a workplace pension â most of which include employer contributions, making them even better value. Donât opt out just to save money now; you will regret it in later years.
Last year saw more than a million people join a pension scheme for the first time, mostly as a result of auto-enrolment in workplace pensions. However, many of those new joiners â and many existing scheme members too â pay into their pension only the minimum amount. This is a wasted opportunity, because everything you pay into your pension is boosted by 20 per cent tax relief (so every 80 pence turns into a pound) and the whole sum then benefits from compound interest over time â so the sooner you boost your contributions, the better.
If you joined a scheme several years ago, youâve probably been receiving annual statements and just filing them. Well, itâs time to dig them out and take a look. The figure will have risen year by year, but is that rate of growth going to be enough? You probably canât tell if itâs good or bad, but a financial adviser can. You can arrange a free pension check with a local adviser who can assess your current arrangements and recommend any possible improvements you could explore.
Most people have a number of different pension pots from various employers. Itâs usually worth consolidating these into a single pension pot â for one thing itâs easier to manage when you reach pensionable age, and for another you may achieve a better rate of growth and lower administration fees. Talk to your financial adviser about whether this is best for you. Also make sure you track down any âforgottenâ pensions you may have. (If you have final salary pensions, however, itâs probably best to leave them where they are.)
You should be able to access your pension at any time from the age of 55. So if youâre approaching that age and have other savings elsewhere (e.g. in ISAs), you could consider moving these into your pension. Youâll receive a boost from tax relief at your marginal rate, and probably a better rate of growth too. Just make sure you wonât need to access the money before you reach 55. Also consider the tax implications if you then need to make a big withdrawal.
The good news is that todayâs pensioners have more choice than ever before. Thatâs also the bad news. More choice unfortunately means more potential for making mistakes, if you donât fully understand all the implications of what youâre doing. Pension freedom can seem very complex if youâre not familiar with all the terms â but it doesn’t have to be confusing.
For the simplest introduction to your choices under pension freedom, take a look at our quick pension guide. You wonât find a more straightforward introduction to the main options available to you, and the pros and cons of each.
To discuss your pension choices in more detail, talk to a financial adviser who specialises in pensions. You can find one local to you here.