Standard Life’s top ten tips to make the most of pension freedoms
Standard Life outlines ten top tips for people planning for retirement in the new world of pensions freedoms.
The tips highlight some of the risks and opportunities for savers and highlight why it’s worth spending time planning ahead to make the most of the changes - from passing on your pension to loved ones, to making the most of tax relief.
Get a clear picture of what pensions you have – many people lose track of old pensions from previous jobs, especially after moving house. Use the free Government service to track down your money: gov.uk/find-lost-pension
If you have various pensions from former jobs, think about whether you want to ‘tidy-up’ your pensions - there could be benefits in bringing them together in one pot so it’s easier to keep an eye on what they’re worth and how they’re invested. This might not be suitable for everyone.
Check if you are making the most of your workplace pension – your employer might match some of what you pay in. See if you could afford a bit extra each month, to give yourself a better opportunity to build a large pension pot. Remember that for every £80 you pay in, normally it gets topped up with £20 in tax relief.
Make sure your Beneficiary Nomination is up to date – the new changes mean it’s easier to pass on your pensions to loved ones. Your pension company will look at your Beneficiary Nomination when deciding who to pay your savings to, and your Will usually isn’t relevant. Keep your Beneficiary Nomination up to date by requesting a form from your pension company, or you might be able to do this online.
Talk to your family – with the new flexible rules about inheritance to bear in mind, you may want to work through these decisions together.
Check how your pension savings are invested. You might have selected the funds years ago, and they may no longer reflect your wishes today. Or perhaps you are in a ‘default’ fund, one which was automatically selected for you at the beginning. Either way, have a look and see if the funds suit you. If you’re not sure, speak to an expert.
If you’re approaching retirement and have ISA or other savings, you may want to review these and consider moving your savings into your pension in order to make the most of tax relief – this won’t suit everyone, but is worth considering.
Be aware of scams – the new flexibilities also give more opportunities for scammers. So remember, if it sounds too good to be true, it probably is.
If you already have a financial adviser, consider reviewing your retirement plans with them in light of the new rules. If you don’t, you may want to consider whether you would benefit from advice.
Think ahead about how you might want to access your savings in retirement – you’ll have a choice of accessing cash, keeping your savings invested, drawing a flexible income, buying a fixed income or some combination of these – you’ll feel more confident making your final decision if you’ve spent time thinking about what’s right for you in advance. There’s lots of information available online which can help, including the Government’s Pension Wise website.
Julie Hutchison, Standard Life’s Consumer Finance Expert said: “The focus on the changes which arrived on 6 April 2015 has quite rightly been to support people over the age of 50 for who the new rules could have an impact on decisions they’re making right now. Now that the pensions changes are in place, it’s a good time to broaden the conversation to help those who are still some way off retirement to get thinking about what the new rules mean for them. It’s clear the savings market has fundamentally changed, and not just for people who have reached retirement. They affect anyone who is saving for the long-term.
“The new savings market offers much more flexibility and choice, which is a positive for savers, but it can be overwhelming. Getting your new savings plan in place will help you feel in control. This could mean talking to your family or streamlining your approach by getting everything in one place. Either way, there are certain things like your Beneficiary Notification that you definitely need to tick off the list. And remember, you don’t have to do it alone. For some people, talking to a financial adviser will help, but there’s also lots of tools and guidance available online.”
Laws and tax rules may change in the future. Your personal circumstances also have an impact on tax treatment. Investments can go up or down in value and may be worth less than was paid in.