Tuesday 7 July 2015

What's My Pension Worth?



It is hard to argue about the importance of saving for old age.  Those still of working age need to look at how they are going to finance their later years.  Those already retired need to think about getting the most out of their available finances.  The exact rules around pensions and savings can be changed in line with government policy at any given time.  Indeed the pension system has just been through an overhaul and with an election looming, politicians of all colours are setting out their plans for the future of pensions and the pensions of the future.  In reality, however, these plans only have any meaning to people who are focused on saving for retirement.  Let us therefore look at some key questions on the topic. 

What Is A Pension Pot? 
Quite simply a pension pot is a common term used to describe savings which are specifically to finance retirement.  People contributing to a pension pot may get assistance from the government (in the form of tax relief) or from an employer (in the form of contributions). Pension contributions are usually locked away until you reach retirement age.

How Do I Calculate My Pension?
There are plenty of online calculators to help with this.  We strongly recommended to keep track of how your pension is doing so that you know where you stand.  If you do decide you need to take action, sooner is usually better than later.  

I Do not Like What I'm Seeing, How Can I Build A Healthier Pension Pot?
You can save more money, you can manage your savings more effectively or you can do both.  It can help to look at this question in the light of your overall financial situation.  For example if you are carrying high-interest debt, such as credit-card debt, then it may well be in your best interests to focus any spare cash you have on paying this down.

Once you have cleared your debt, you can then divert the funds to building your pension.  If you do have spare cash and are in employment, then it may be useful to look at making extra contributions to your workplace pension.  This can be particularly helpful if your employer will top up any contributions you make.  If you're unsure about locking cash away until you retire, then it may be worth looking at ISAs as an alternative.  Although contributions to ISAs are made out of post-tax income, generally speaking the income they generate is tax-free and the money in them remains accessible if you need it.

What Do I Need To Know About Getting More From My Pension Pot?
For many years getting more from your pension pot generally meant getting the best deal on an annuity.  Now there are more options for those with pension pots.  With this in mind, it can be very helpful to get some professional advice before taking any significant decisions on how best to use your pension pot.

It is also advisable to keep up to date with any changes which may affect pensions.  For example at the current time, the Conservatives have a proposal to allow holders of annuities to sell them on.  If enacted this could have massive implications for existing pensioners. 

It's also worth remembering that, generally speaking, pensioners have access to the same savings and investment products as those of working age.  For example they get exactly the same ISA allowance as working adults.  There are even some savings products tailored specifically to their needs (e.g. pensioner bonds).  These can all help pensioners to make the most of their finances.  

For more information please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.


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