Don’t be shy about retiring: Why you should review your pension now rather than later
8 March 2021
As part of International Women's Day we have some excellent articles from our experts aimed at helping women know their worth and take ownership of their own affairs when it comes to pensions, wills, powers of attorney and property. In this article, Tax and Trusts consultant Imogen Lea discusses her own experience of taking control of her finances and the risks of putting it off.
The word 'pension' leaves me cold – a bit like 'mortgages' or 'billing'. I know that they are important but I try to put them off.
One of the 50 life lessons from Regina Brett includes "save for retirement starting with your first pay cheque". I think, like many of us, while I ignored the advice for the first pay cheque, at some point I started putting money into an employment pension (albeit with no proactivity about how that pot of money was going to work for me).
According to Unison, only 52% of women are adequately saving for their retirement (versus 60% of men). Female pensioners have a net weekly income that is worth 15% less than their male counterparts yet female pensioners account for 61% of pensioners above state pension age. Worryingly, over two thirds of pensioners living in poverty are women. And we get to live longer too – so living on a much lower income for longer.
The State Pension is usually in the news but rarely does it make big headlines. The Pensions Act 2011 increased the women's state pension age from 2016, but many women who were expecting to retire had no idea of the change. Last week, it was revealed that due to errors on automatic cash increases some women could be due pay outs from the Government representing underpayments going back several years. Admittedly, pensions are not thrilling news, but it is estimated that 200,000 women could be affected and in line to be reimbursed for sums averaging £13,500. The state's bill for tackling the shortfalls is estimated to be £2.7bn. Pensions can be big money!
In January 2019 I had two pension pots from two previous employers and I heard two things from two independent financial advisors (IFAs):
- When was the last time your pension provider contacted you about your funds?; and
- The aim of saving for a pension is not just about retirement – it is trying to put yourself into a position where you do not have to work any more if you do not want to.
The result of such advice was that I took the plunge - I had an IFA review my funds and I transferred these across. It was striking to me that the original providers did not even ask why I was going. It felt as though to them I was just transferring a car insurance policy for the best deal rather than the savings of some 15 years.
Following this experience, every 3 months I now receive a lovely updated statement for that quarter and at least once a year I get a review meeting (albeit this year virtual) with the IFA. This is partly to say what has happened on the fund, but also to catch up on my position and to see what is appropriate and reviewing whether any changes need to take place. There are obviously small additional costs involved for this, but it has only been two years and, even in 2020 despite Covid, my pension fund went up by 10% after fees.
The proactive nature of being looked after by an IFA that takes the time to speak to you has the added benefit that I am now about to start paying into an ISA. The snowball effect means that I even had a proper mortgage review with a well known High Street bank resulting in the very real possibility that my mortgage is to be paid off four years earlier than planned.
Making these small steps has meant that I have stopped the inertia, but since then it really does feel as though I am tackling those cold areas and not even putting all my eggs in one basket.
My mother's own advice is nicely echoed in Baz Luhrmann's "Wear Sunscreen": 'Don't expect anyone to support you, maybe you have a trust fund, maybe you have a wealthy spouse but you never know when either might run out'. There is something liberating in taking proper responsibility and ownership for my long term future rather than just the here and now.
In my whole career I have only had one client who was a clairvoyant, and so I imagine the vast majority of us do not know what is going to happen in the future. However, by just taking an interest in these areas it does feel as though we can be as prepared as possible with what life will throw at us.
IFAs come in all shapes and sizes and so it is very much choosing one that suits you and you can trust. At Wilsons we do have connections with a large number of IFAs and would be happy to some suggestions. Please do get in touch and we can assist you with reviewing your estate planning.
Finally - and if you haven't already – please read Regina's other 49 lessons.