11 tips on how to tick off your pension to-do list before Christmas

·6 min read
'Checking how much is in your pot and looking back to how much was in it a year ago can be a good reminder of your pension progress.'

Pensions make key part of financial planning and as we head into the festive season it's good to take stock of what retirement investment plan looks like.

"Your pension will rarely get its moment at the top of your to-do list, but finding time to tick off some life admin can help you go into the new year feeling lighter and more organised," said Becky O’Connor, Head of Pensions and Savings, Interactive Investor.

The stock broker's data suggest a high number of people check their self-invested personal pensions (SIPP) during Christmas week.

"‘Twixmas’ – the week in between Christmas Day and New Year’s Day, might be just the moment for a bit of ‘penmin’, that’s: pension admin," said O'Connor.

She shares her top tips on how to tick off your pension to-do list:

Get the app

Log in to your pension, online or on the app, if you have one.

If your provider offers an app that you aren’t using yet, downloading it now could help you prioritise your pension next year and beyond. You can do this for current and former workplace pensions.

Check in on older pensions

Checking on pensions from former jobs might help you to consolidate your pensions into one place.

Consolidating can help make your pension admin easier when you retire. It can also help you avoid charges, and look for a wider or better choice of investments available elsewhere.

It can also be more convenient to be able to draw down from one pot when you reach retirement age.

Not everyone is able to move their pensions though, as some benefits or guarantees prevent this. So it’s worth checking this if you are thinking about moving your pots to one place.

Check how much is in your pension

Checking how much is in your pot and looking back to how much was in it a year ago can be a good reminder of your pension progress and give you a clearer sense of the difference one year can make.

Check the returns

"It’s useful to pull apart how much of the growth has come from investment returns, how much from your own contributions, how much from your employer and how much from tax relief, to give you a better idea of the value of all of these elements of your overall pension," say the experts.

"If your pension fund hasn’t done so well, check which asset classes and sectors it is invested in that have dragged it down. It might be a prompt to shift the focus of your fund, if that’s an option for you."

Consider increasing your contributions

If it has been easy for you to make contributions at your current rate, perhaps you can afford a little more.

this is a significant consideration if you haven’t yet maximised your employer matching scheme. If you put more in, check whether your company will too, and what the maximum amount is your employer will contribute.

Use a retirement income calculator

This can help you figure out if your pension is likely to give you a decent retirement income.

The Pension and Lifetime Savings Association (PLSA) recently suggested that £20,800 ($27,464) a year, including state pension, is enough for a decent income in retirement, the experts said.

This equates to a pot worth around £300,000 by the time you retire, assuming you’ll get a full state pension.

Checking whether you are on track and whether this is this amount right for you or if you think you’ll need more when you retire can give you an idea of by how much you might need to increase your contributions.

Consider moving to a more or less growth-focused set of funds

This depends on your own personal risk appetite as well as your age and retirement plans.

"Generally speaking, the younger you are, the more risk you can afford to take as you have a lot longer until you retire. But even for older pension investors, a higher proportion of equities can have its place, particularly if you are conserving some of your pension to leave to relatives, or you don’t plan on retiring for a while," said the experts.

"Remember that while inflation is relatively high, to keep your pension growing at a rate above prices, you’ll need to invest a proportion in higher-growth equities."

Check whether your fund is sustainable

If your pension scheme offers a sustainable option you like the look of, instead of your current one, it is usually possible to switch relatively easily within the same plan.

Fill out your ‘Expression of Wishes’ form

Only around 15% of pension customers have filled out these forms, according to Interactive Investor figures.

They allow you to nominate who should receive your pension when you die. "It’s important because defined contribution pensions are not part of your estate, so aren’t covered by your will," the experts said.

Think about your retirement age

It's a good idea to consider the age you might like to retire, as well as what you would do if you had to retire early, things that could get in the way or place additional demands on your finances at that time of life can help you plan for the future.

You will be able to access your private pension from the age of 55, but unless you have been very focused on pensions, you are unlikely to be able to retire at this age. Your state pension entitlement age could be from 66 to 68, depending on how close you are now to retirement.

"Work out whether ISAs could also help you plan your retirement, bearing in mind your current taxpayer status; the age you plan to retire and likely taxpayer status when you do retire," the experts said.

"With ISAs, you pay into them from post-tax income but don’t pay income tax on what you take out from them; with pensions, you don’t pay tax on the contributions but you will be liable for income tax on withdrawals, after your 25% tax-free lump sum has been claimed."

Check your state pension record

This will show you whether you are on track to receive a full state pension. You can do this on the government website using a government gateway.

If you are worried you are behind, you can plug gaps in your national insurance record with class 3 or class 2 contributions.

Watch: When should I start paying into a pension?

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