Why you need to get a pension health check

12 February 2020

Woman checking pension

Confused by pensions? Lost track of a pension pot from years ago? With over 10,000 pension schemes and an ever-changing pension landscape such as retirement age and tax on pensions, as well as lack of access to education and advice, you wouldn't be blamed. And you can always think about it later, right? Wrong. It really is better to check up on your pension now, to make sure your savings aren't going backwards.

Who needs a pension check?

Everyone! But especially if you fall into one (or more) of these groups:

  • Women

According to research, women are more likely to be in a pension with ‘very expensive’ fees (anything over 1.5%) than men. This is mainly due to the fact that women often have smaller pension pot sizes, with fixed fees adding up to a higher percentage of the pot.

  • If you have an older pension

Pre-2000 pensions have been found to be the most expensive type, due to government reform on pension charges only occurring after 2000. Some of these pensions also use a more traditional style of investing which may lead to lower returns compared to new types of investment methods.

  • If you were contracted out of SERPS

If you were contracted out of SERPS (State Second Pension) in the 80s and 90s, there’s a good chance you’ll also be in an older pension, with poor investments and a complex and/or expensive fee system. You can check if you were contracted out on gov.uk.

I definitely began to prepare too late. I think there should be a public information film, or maybe even a pension information event in schools. It's common sense.

Why should you get your pension checked?

Other than, 'because it's good to' here are some excellent reasons to get a health check on your pension:

  • The average UK consumer who takes financial advice will increase their pension wealth by £30,991*
  • Over £250 billion of pension funds could benefit from consolidation*²
  • People pay on average three times too much for their pension*³
The average UK consumer who takes financial advice will increase their pension wealth by £30,991

Source: see below*¹

What does a pension check involve?

In order to make your pension work for you, there are five key things which need to be considered:

  • Investment strategy – ensuring your pension is invested correctly is the first rule of pension checking. Pensions are usually invested in a mix of equities, bonds and cash. It's this combination which determines the returns you'll see from your pension, so it's pretty important.
55% of customers had pensions with the wrong investment strategy for their needs

Profile Pensions customers

  • Fund performance – are your investments performing as they should (or could)? This needs looking at according to industry benchmarks and comparing to the rest of the market.
49% had a poorly performing fund manager

Profile Pensions customers

  • Fees and charges – finding out what charges you are paying on your pension is key. Even if you could be paying a small percentage less, that will have a big impact on your pension growth and could eat away at your hard-earned savings.
  • Flexibility – does your pension allow you flexible access to your savings when you reach 55? Ie being able to withdraw money whenever you want or need it, while leaving the rest invested? This flexibility also allows you to pass on your savings to family/loved ones when you die. Many older pensions don't have this valuable feature.
94% of pensions don't allow flexible access from age 55

Profile Pensions customers

  • Consolidation – lots of people have different pension pots dotted about, which can be a right headache. It could be that those pots can be brought together into a single, better, easier-to-manage plan.
You could get a state pension forecast to check whether you've got a full NIC record and will qualify for the full state pension. If there is a shortfall, you may want to look at making up any gaps.

How to check your pension

How much state pension will you get?

Currently, the full amount of new state pension is £168.60 a week (just over £8,750 a year). That does depend on a few conditions though, such as paying the correct amount of national insurance for 35 years etc.

To check your state pension online, including the date you'll reach state pension age, you can find out on gov.uk.

How much do you need to retire?

To calculate how much you need to retire, including your state pension and any of your existing workplace or personal pensions, there are a number of online tools out there.

Pension advice from Mumsnet and Gransnet users

I definitely began to prepare too late. I think there should be a public information film, or maybe even a pension information event in schools. Just something to let us know that we should look after our finances for our future financial health. Simple information for schoolchildren. It's common sense.

You could get a state pension forecast to check whether you've got a full NIC record and will qualify for the full state pension. If there is a shortfall, you may want to look at making up any gaps.

When I was 40 I joined a big company with a good pension scheme, up to then I had no pension. It was my first 'proper' career job after a break bringing up children. Right from the start I immediately paid most of my extra salary into AVCs (Additional Voluntary Contributions) to the pension scheme. Having never received the extra pay, I didn't miss it and I did that every time there were wage increases. Because I paid maximum AVCs for those 12 years, my occupational pension with my state pension means that I now have a comfortable pension income.

Well-communicated information is important. I am grateful to my union for providing clear guidance at a time when it would have been easy to make choices that would have made my retirement income much less.

I'm already retired, although DH is still working. We're paying the absolute maximum into his company pension, which is matched by his employer, and I wish we'd done the same with mine. I know it's tempting to do the minimum, but if you can spare a little extra, you'll never regret it. I doubt anyone's ever regretted paying too much into their pension!

Get your pension health check

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How can Profile Pensions help?

Profile Pensions give impartial advice, so you know the recommendations you’re getting are completely unbiased and in your best interests. That’s why they’re able to do a full pension health check and compare your pensions to the best in the market.

By signing up to Profile Pensions above, you'll take the first step to getting your pensions checked. You’ll shortly receive an application form in the post that you’ll need to complete to get your pension health check started.

There’s no upfront cost for any of the investigations and advice that come with a pension health check. You’ll only pay if they’re able to improve what you’ve got and you choose to take any advice to transfer your pension to something better.

You’ll know the exact cost of your advice before you agree to it, with the fee being taken from your pension pot itself, not your bank account.

This page is sponsored by Profile Pensions

Stats sources

*¹ The Value of Financial Advice, A research report from the International Longevity Centre, December 2019
*² Financial Conduct Authority, 'Effective competition in non-workplace pensions', July 2019
*³ Profile Pensions, analysis of 942 pensions between 9/10/19 and 4/12/2019