Wednesday 12 February 2020

When did you last check your Pension? It could be time for a Health Check

Photo by Michael Longmire on Unsplash

{This post was commissioned by Profile Pensions/ Mumsnet}

With an ever-ageing society as people live longer, it’s now quite different as a woman heading towards pensionable age. Well, I say heading towards, but I am actually quite a few years off the age to claim my state pension. As a youngster, all women could take their state retirement benefit from age 60, but now for me, as someone born in 1973, I’ll be 67 when I can take my state pension, that will be in 2040.

Will my State Pension be Enough?
If I was of the age to retire today the full level of the new state pension is £168.60 a week (£8,767.20 a year), as long as I have 35 years of NI contributions. If we assume that this raises in line with inflation, it means that when I retire this would be no-where near enough to allow me to live a comfortable lifestyle. How do you pay rent, bills, food and other living costs on around £700 a month, especially if you don’t have a council or mortgage-free house?

I input a few brief details into the Profile Pensions calculator to see how much yearly income my husband and I might need if we were to retire at age 67, whilst renting a house, and it showed that between us we’d need £24,589 per year on top of our state pension. Are our pensions operating at a level to give us that kind of yearly pay out in twenty years? I suspect not.

Baffling Pensions
This is why it is so important for me to have a good personal pension income payable to me in the future, but I have to admit that for the last few years, I have been burying my head in the sand. I see the yearly statements arrive and I file them away but that is it.

I first started to pay into a company pension scheme when I was 23 and I remember contracting out of SERPS (State earnings-related pension scheme) and truthfully, I am clueless as to how this will (or won’t) impact any state pension that I receive in the future. It seems a little crazy that I feel so clueless as I’m a well-educated woman, so I know there must be other people like me, who are a bit baffled by what they will receive when they retire.

Back in 2013 when we moved to East Sussex, I changed from employed to self-employed and as I was just working ad-hoc and earning a small wage I wasn’t paying into a pension scheme. Roll forward to last year and I realised I was six years down the line and I hadn’t made any pension contributions in that time and something had to change. I started a new job last year and eagerly joined the pension as I love the idea of a company pension much more than a personal one, as I like someone else to be paying in, as well as me. However, six months after starting the job I left, as it just wasn’t for me and that now leaves me with a grand total of four pensions that I am no longer paying in to.

I’ve often wondered if I should combine them to make things easier for me to manage and know what I will benefit from one day, but I have different kinds of pensions; my one from ten years at the university is a final salary local government scheme and as I understand it, they are great schemes to be in and the others? Well, again I have no idea what kind of schemes they are, or what that means for me.

I hear lots of terms talked about in regard to pensions – with benefits,  defined contributions – but again I am a bit clueless, and that was why I decided at the beginning of this year to no longer be a pensions tourist, and to take control and find out what is the best thing to do with the money I have invested from 18 years of employment.

Piles of my pension’s paperwork
At-risk groups
I was surprised to find that I fit the profile of someone at risk of having a poor performing pension. First off, I’m a woman and generally, we have smaller pension pots than men; this means that any of my pensions that have a fixed management fee are equating to a higher percentage for me. Honestly, I’d never even thought about management fees, call me naive! Second, I contracted out of SERPS back in the 1990s and this would suggest I have an old-style pension, from before the pension reforms of 2000 and these have been found to be the most expensive type of pensions. Add these worrying indicators to my desire to better know I am able to live well in retirement, and I can definitely see how I could benefit from a full pension health check.

Pension Health Check with Profile Pensions
It was with great joy that I accepted the commission from Mumsnet to investigate how Profile Pensions could help me, and other people like me. They weren’t a company I’d heard of before, but then again; I’ve already admitted I’ve been hiding from my pensions! After a quick trawl of the internet and some research, I find that Profile Pensions established in 2015 and have gone from strength to strength since. They are authorised and regulated by the Financial Conduct Authority, and currently have a Trustpilot rating of 4.8/5 gained from 1627 reviews. Having spent a good 45-minutes reading reviews I feel happy to let Profile Pensions do a pension health check on my behalf to see if they can secure me a better proposition for the long term.

They are a whole of market, impartial pension adviser, who’ve helped over 20,000 people be better off in retirement. They exist to serve the masses of people who are typically underserved by the financial advice industry, by offering accessible advice to everyone, with no cost to signing up.

I’m very interested to have a pension health check and it is easy to undertake one. I can sign up via the Pensions Health Check on Mumsnet and I’ll receive a letter in the post containing all the information about the pension health check, an application form to fill out and a pre-paid envelope to return the application (and even a free pen!). Profile Pensions will then engage one of their experts to investigate the market and see if they can offer me a better proposition that will make me better off in retirement.

To this point, their service has not cost me any money. It is only If I’m happy and I want them to move my pensions that there is then a charge, which is taken from my pension fund, so I don’t even have to find the cash then and there. Alternatively, If I hear their findings and choose not to act on them, even if they are giving me a proposition that means I could be better off financially, they won’t charge me anything. I love the peace of mind that gives me, knowing that they are so confident of the work they do, that the fee is only payable when I am happy and making a move towards a more profitable future.

 “The average UK consumer who takes financial advice will increase their pension wealth by £30,991.”*

How I want my retirement to feel!

Feeling in control
I haven’t actually had the results of my pensions health check as yet, but even just taking the time to research more about pensions and Profile Pensions, and finding out the current values of my pension funds as part of this exercise has been really empowering. I am excited to see what Profile Pensions come back to me and present, and at least now I know that I need to start paying in again on a monthly basis to be able to secure a good monthly pay-out in the future, so I can fully enjoy my older years, without the worry of earning money into my seventies and eighties.

How about you, have I piqued your interest? Why don’t you also sign up for a pensions health check with Profile Pensions?

For more information on the benefits of a pension health check please read this useful blog from Profile Pensions to find out more.

*Source: The Value of Financial Advice, A research report from the International Longevity Centre, December 2019

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