Giving your pension some attention!

For many people, the mere mention of the word ‘pension’ can induce boredom or fear in more-or-less equal measure. The pensions world is full of jargon which is hard to penetrate for the outsider, and it is seldom an attractive message to ask people to make sacrifices now for some rather vague future benefit.

The pensions world also regularly issues doom-laden warnings about a pensions crisis, with millions of people known to be saving too little at present to give themselves a comfortable retirement. For the recipients of these messages, pulling the duvet back up over their heads can seem like the only response.

But the Pension Attention campaign is designed to change that. Rather than putting it all in the ‘too difficult’ bucket, the campaign encourages people to do something constructive to help make sure they can look forward to a decent standard of living when they are no longer earning.

One of the most important things which people can do – apart from not throwing away letters from their pension providers – is to understand where they start. Whilst you cannot change the past, you can encourage your employees to work out where they stand and make a plan for where they want to get to.

Get a state pension forecast

The easiest part of all of this is to get a state pension forecast. This can be done via gov.uk and you can now see how much state pension has been built up so far, how much someone can expect to get if they keep working up to pension age and whether they have any gaps in their National Insurance record which they could fill.

For many people on modest incomes, the state pension will form a large part of their income in retirement so understanding this and making the most of it will be a great start.

Assemble your pension paperwork

The next step is to assemble other pension paperwork. Since the dawn of automatic enrolment in 2012, and starting with the biggest firms, employers now have a legal duty to put anyone currently earning £10,000 per year or more into a pension and to pay into it. The result of this, especially for people who may have changed jobs several times in recent years, is that people can end up with multiple pensions from multiple providers.

For this reason, it’s vital to remind employees to keep hold of pension paperwork and use it to see how much they have built up and how much this is expected to add to their state pension.

Having worked out what has been achieved so far, it’s then worth working out goals for retirement. A very helpful benchmark is provided by the Pensions and Lifetime Savings Association (PLSA) ‘retirement living standards’ research. This allows you to think about what would make for a good retirement for you – and then indicates what sort of income you might need to deliver it. For example, the current standards suggest that a single person needs around £14,400 for a very basic ‘minimum’ living standard, £31,300 for a ‘moderate’ retirement and £43,100 for a comfortable old age.

For many people, the pension saving they have done so far, including the state pension will give them a good prospect of reaching the ‘minimum’ standard but not much more.

Aim for the retirement you want

So, paying your pension ‘some attention’ and encouraging your employees to do the same, could mean working out where you’ve got so far, thinking – perhaps for the first time – about the kind of retirement you want, and then seeking help with drawing up a plan to get you there.

You could always go back under the duvet, but your future self won’t thank you!