Publish Date: Posted about 2 months ago
Author:by Simon Megson

Unlocking Your Pension Potential: Securing Your Financial Future

Curious about the benefits and features of pensions that you might not be aware of? Guest speaker Simon Megson, Managing Director at INCO Financial, delves into the compelling reasons why enrolling in a pension is a wise move, whether you're employed or self-employed.Why should I enrol into a Pension? - employedThere are several benefits and features with pensions which you may not be aware of. The first point to mention is if you contribute the minimum amount to a pension, 5% gross, your employer will contribute 3%. Not only will this improve your overall retirement plan, but it can also be seen as your employer giving you a bonus every month. You can contribute more to your pension should you wish.The pension is a pot of money which overtime is expected to increase in value. Typically, this is invested in a lifestyle fund whereas you approach your retirement date, the investment will reduce in risk. The earlier you contribute to your pension, the increased probability you will have of achieving a sustainable value at retirement.The full state pension income is currently £10,600 p.a. although this will help towards income in retirement, for most people it is not enough, and other sources of income should be considered. The contribution towards a workplace pension will be a large contribution towards this.I’m self-employed, do I need a Pension?Unlike employed staff, your employer will not contribute a percentage of your salary into the pension. Based on this, it is even more important to start contributing to a private pension to plan towards your retirement. It would be beneficial to consider contributing to a pension on a regular basis and save for your retirement. Unlike the workplace pension, you have more responsibility with setting up the regular payments and choosing specific investment funds. This is one reason why it is important to seek financial advice to help plan out your pension and understand a “suitable” amount to allocate towards your pension.As mentioned above, the full state pension income is £10,600 p.a. to qualify for this you must contribute 35 qualifying years of NIC. For an individual who is self-employed, this may not have happened therefore a reduced state pension will be available. This again confirms the importance of having a separate savings plan such as a private pension.How much do I need to save to have a suitable Pension value?On average, a typical pension value is expected to be £200,000 to help with additional income in retirement. The below shows examples of how much expected to save based on certain ages:If you start saving into your pension at 22, you will need to £283 a month to get a £200,000 pot by 66.But you wait until you’re 32, you would need to contribute £402 to your pension each month to get the same size pot.If you started saving at 42, it would be necessary to contribute a larger amount of about £615 a month to have £200,000 by 66.Leave it even later until you’re 52, just 14 years away from a retirement age of 66, you would need to contribute £1,122 each month.*The figures above assume that your contributions stay the same until you are 66 and that your investments grow by 5% a year.*What should I do with my other pensions from old workplaces?It is important to review these pensions to understand if there are any guarantees or benefits in place on the existing plan. When you leave an employer, the pension will stay with the current provider, but no more contributions will be made, this is known as being “paid up”. At this time, it would be recommended to seek financial advice to support with the pension transfer process and understand what options are available.On average, there are £26.6 billion worth of lost pensions in the UK. This is based on figures provided by the Pension Policy Institute in October 2022. If you are unsure of previous pensions and wish to track these down to understand the current options and value, we would be happy to help you locate these and support with the overall process.What age can I access my pension?Under current pension rules, you can access your pension at age 55. This will be increasing to age 57 from 2028. When I reach pension age, how can I access my pot?Your pension pot will have built up a reasonable value over time and once you decide to retire there are several options available. At this time, you should contact the pension provider to understand how you can access the pension. What risk am I taking with my Pension?If you initiated a pension during your initial employment, you were probably automatically enrolled with funds chosen based on your age at the time. As you approach retirement, you might find that you're exposed to more risk than you're comfortable with. It's advisable to periodically evaluate your pension plan to ensure it aligns with your financial goals and risk tolerance.Do I qualify for State Pension on Maternity leave?Yes. When you're on maternity leave and eligible for statutory maternity pay, you continue to make national insurance contributions. These contributions contribute to your state pension entitlement, ensuring that you qualify for it. Ready to explore your pension options or need personalised guidance? Get in touch with Simon Megson, Managing Director at INCO Financial, for more information and support. Your financial future matters! 💰 Simon’s LinkedIn: https://www.linkedin.com/in/simon-megson-6830a689

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Why should I enrol into a Pension? - employed

There are several benefits and features with pensions which you may not be aware of. The first point to mention is if you contribute the minimum amount to a pension, 5% gross, your employer will contribute 3%. Not only will this improve your overall retirement plan, but it can also be seen as your employer giving you a bonus every month. You can contribute more to your pension should you wish.

The pension is a pot of money which overtime is expected to increase in value. Typically, this is invested in a lifestyle fund whereas you approach your retirement date, the investment will reduce in risk. The earlier you contribute to your pension, the increased probability you will have of achieving a sustainable value at retirement.

The full state pension income is currently £10,600 p.a. although this will help towards income in retirement, for most people it is not enough, and other sources of income should be considered. The contribution towards a workplace pension will be a large contribution towards this.

I’m self-employed, do I need a Pension?

Unlike employed staff, your employer will not contribute a percentage of your salary into the pension. Based on this, it is even more important to start contributing to a private pension to plan towards your retirement.

It would be beneficial to consider contributing to a pension on a regular basis and save for your retirement. Unlike the workplace pension, you have more responsibility with setting up the regular payments and choosing specific investment funds. This is one reason why it is important to seek financial advice to help plan out your pension and understand a “suitable” amount to allocate towards your pension.

As mentioned above, the full state pension income is £10,600 p.a. to qualify for this you must contribute 35 qualifying years of NIC. For an individual who is self-employed, this may not have happened therefore a reduced state pension will be available. This again confirms the importance of having a separate savings plan such as a private pension.

How much do I need to save to have a suitable Pension value?

On average, a typical pension value is expected to be £200,000 to help with additional income in retirement. The below shows examples of how much expected to save based on certain ages:

If you start saving into your pension at 22, you will need to £283 a month to get a £200,000 pot by 66.
But you wait until you’re 32, you would need to contribute £402 to your pension each month to get the same size pot.
If you started saving at 42, it would be necessary to contribute a larger amount of about £615 a month to have £200,000 by 66.
Leave it even later until you’re 52, just 14 years away from a retirement age of 66, you would need to contribute £1,122 each month.

*The figures above assume that your contributions stay the same until you are 66 and that your investments grow by 5% a year.*

What should I do with my other pensions from old workplaces?

It is important to review these pensions to understand if there are any guarantees or benefits in place on the existing plan. When you leave an employer, the pension will stay with the current provider, but no more contributions will be made, this is known as being “paid up”. At this time, it would be recommended to seek financial advice to support with the pension transfer process and understand what options are available.

On average, there are £26.6 billion worth of lost pensions in the UK. This is based on figures provided by the Pension Policy Institute in October 2022.

If you are unsure of previous pensions and wish to track these down to understand the current options and value, we would be happy to help you locate these and support with the overall process.

What age can I access my pension?

Under current pension rules, you can access your pension at age 55. This will be increasing to age 57 from 2028.

When I reach pension age, how can I access my pot?

Your pension pot will have built up a reasonable value over time and once you decide to retire there are several options available. At this time, you should contact the pension provider to understand how you can access the pension.

What risk am I taking with my Pension?

If you initiated a pension during your initial employment, you were probably automatically enrolled with funds chosen based on your age at the time. As you approach retirement, you might find that you're exposed to more risk than you're comfortable with. It's advisable to periodically evaluate your pension plan to ensure it aligns with your financial goals and risk tolerance.

Do I qualify for State Pension on Maternity leave?

Yes. When you're on maternity leave and eligible for statutory maternity pay, you continue to make national insurance contributions. These contributions contribute to your state pension entitlement, ensuring that you qualify for it.

Ready to explore your pension options or need personalised guidance? Get in touch with Simon Megson, Managing Director at INCO Financial, for more information and support. Your financial future matters! 💰

Simon’s LinkedIn: https://www.linkedin.com/in/simon-megson-6830a689

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Unlocking Your Pension Potential: Securing Your Financial Future