So you’ve thought long and hard about your future, and you’re considering retiring soon.
Now it’s time to look into your past. If you’ve changed jobs even once in your working life, the likelihood is you have more than one pension pot. This is good, as retirement provisions of any kind give you options. We’ll talk about those options in more detail in next week’s blog. First thing’s first. You need to know how much you have to play with.
Understand the Basics
There are a number of different types of pensions you might have, and each one will have repercussions for your life in retirement. That’s why the fact-find is a critical part of the process. For your current pension, speak to your HR or payroll department. For old pensions, it may be the HR/payroll section of your former employers, a life company or indeed a pensioneer trustee.
If you hate this kind of admin, and are tempted to ignore some old or possibly small funds, consider this… (or indeed just get The Money Advisers on board to do the heavy lifting for you)
Can you afford to lose track of £13k?
I read in The Guardian the other day that an estimated £19bn is ‘lost’ to workers in forgotten pension pots, the equivalent of £13,000 per pension plan; if this is the average, what amounts have gone missing at the higher end of the scale? In this era of ‘portfolio careers’ where we change jobs on average 11 times in a lifetime, you can see how one could lose track of a pension or two.
Typically, you will have collected a mix of company pensions and PRSAs (personal retirement savings accounts). Assuming the schemes were DC (defined contribution), the proceeds could have been transferred to a PRSA, a new employer occupational pension scheme (OPS) or a buy-out bond (BOB) when you left employment.
For each pension, PRSA or BOB, knowing the current value, the minimum and maximum ages at which you can draw on them (we’ll talk more next week about how you can stagger your pension pots to your advantage) and any other leaving service options or ts and cs. Your situation could be further complicated by an overseas pension, to which specific rules and conditions pertain.
One more thing to consider: if you’re judicially separated or divorced, is there a pension adjustment order (PAO) on your pensions?
Before you run for the hills, let me say that I can help you through this step if you give me authority to deal with these third parties on your behalf.
The Defined Benefit (DB) pension
These ‘gold-plated’ pensions are now as rare as hen’s teeth. Many DB schemes have been wound up in the last ten years due to underfunding – not enough people working and paying into them for the number of retirees.
There are still some out there and if you’re lucky enough to have one, you will be asked to choose between converting it to a salary for life, or taking a transfer value, which you’ll put into a post-retirement investment like an ARF or an annuity.
It is absolutely critical that you get proper advice on, and give due consideration to, the repercussions of any course of action.
I can tell a cautionary tale of a man who took the salary for life but died just one year into his retirement. His wife, who came to me for advice at this point, would now get just 50% of that annual salary. Had the man transferred out to an ARF, his wife would have inherited the entire fund. The tragedy is that man’s poor health was known, yet he was advised to take the salary for life.
You only get one chance to make a decision like that. Make sure you have all the facts before you do.
If you have need to make sense of your retirement planning provisions but don’t have the time or the inclination to uncover the whole picture, then it’s time to engage The Money Advisers. Schedule a 30 minute, no obligation phone consultation here.