25th November 2013 at 3:01pm
There is a good chance that many of us have a better idea of how many free minutes and texts we receive each month on our mobile phone than how much income we can expect in retirement. Or, we may know the value of our supermarket reward points, but not the value of our pension fund.
Our recent research found this could well be the case, especially if you’re under 45.
Don’t know what I’ve got or what to expect
Almost three quarters of under 45s with pensions have no idea what their pension pots are currently worth. And nearly 80% say they don’t know what income they are expecting when they retire.
Our research shows that most people don’t really know the value of their pension until they are older and in the run-up to retirement, despite the fact that they’re likely to be receiving annual pension statements.
Alongside your home, your retirement savings are likely to be one of your biggest assets. So by not keeping track of the value of your pension pots and how they are performing, you may be missing out on opportunities to take action and really are leaving yourself vulnerable at a later age.
More pension pots than I know what to do with
Keeping track of pension values is not helped by having more than one pension plan, perhaps built up over time as you move jobs. We found that 43% of people in the UK with pensions have two plans or more.
Having multiple pension pots makes it more difficult to get a clear picture of their total value. It could also be a reason for losing touch with pensions.
One big pot
Transferring pots into a single pension pot could help and is something to consider.
Bringing together other things like utility providers or combining TV, phone and broadband packages with one provider is becoming increasingly popular. It makes things easier to keep tabs on and generally cheaper too. The same theory can potentially be applied to your various pension pots.
But before moving your existing pensions you should always check to make sure you are not giving up important benefits, like defined benefits, ‘with profits’ bonuses, guaranteed annuity rates or enhanced tax-free cash. It makes sense to seek expert advice on what you have already got.
This means just one provider to keep in touch with and one annual statement to look at and review. Potentially it can also mean paying lower charges and possibly having more choice and buying power when you come to retire too.
For example, more flexible retirement income may not be an option if you have a smaller pot, but combining pots could change that. This could open up greater income flexibility in retirement and more options to pass on your pension fund to your loved ones when you die.
You may also be able to get a better rate on your annuity if your money was all in one pot.
By not keeping a close eye on your pensions in the earlier years, you run the risk of falling behind and leaving any top-ups until the last minute, when it may be too late to catch up. So it pays to keep an eye on your pension pot.
* All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2018 adults, of which 1361 have a pension. Fieldwork was undertaken between 9th – 12th August 2013. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).