Pension

[SheldonCoop]

So I'm Young-ish, 27 to be precise. I have no understanding of pensions and retirement.

The company that I work for changed pension providers last year and I am yet to transfer what I have accumulated from the previous provider (Standard life) to the new provider (Scottish widow).

I have received my annual statement for the past year I have paid in roughly £1925.58. Not a lot but I am due to increase my contribution for the next financial year. However I am confused with my statement. It states that the growth fund is
-£302.89. With my total value as of April 2020 £1,622.69.

My first question, are there any courses or advisors I can go to to help with my understanding of pensions

Secondly, (shows my naivety) why is my fund less than what I have contributed?

Thirdly. How can I improve my pension prospects?

Pensions are like any stocks and shares investment - they have the potential to go down as well as up. This past 6 months have seen lots of shares fall in value, for obvious reasons.
This isn’t a reason to panic. For one, your pension is a long term investment and at this stage the change over 20, 30, 40 years is what matters. Also, pensions are generally invested in a selection of funds each made up of shares in a number of different companies, so even if one company in one of your funds fails, that does not necessarily have a huge impact on your pension as a whole.
The moneysavingexpert website has some good information set out in a way that is easy to understand. You might also be able to ask your employer if they can arrange for a pensions advisor from the company who arrange the company pensions to come in to talk to employees about the pension scheme and what you can expect.
It is great that you are finding out more. I am not a financial advisor, but my suggestion would be that you keep contributing as much as you can afford, especially if your employer matches what you put in. It is the safest savings vehicle for retirement there is and money put in now has longer to grow than if you wait until you are older. You will get a state pension but not until you are 68, and then only around £9000/year in today’s money - that is really not a lot!
If you look on the websites of the big pension providers they often have a pension calculator, which allows you to put in your age, current pension size, salary and how much you and your employer pay in each month. It will then show you how much that could give you when you retire. I don’t know about Standard Life or Scottish Widow, but Aviva definitely have one.

The money we pay to our pensions gets invested by the pension company in businesses etc. they think will make big profits.

Sometimes the investments perform well. Sometimes they don’t. The pension companies invest in loads to spread the risk.

I think Covid messed up a lot of investments as companies went bust and the pension company etc that invested in them therefore lost money, as their shares are now worthless, so don’t be surprised. Everyone is the same.

I’ve paid into a pension since age 21. Between my employer and me about £300 a month in today’s money (obv it used to be less but more now as I earn more).

It’s forecasting to pay me £6k a year at age 60. It’s not a lot. Could you afford to survive on that. I couldn’t! My state pension doesn’t kick in until age 67.

You don’t feel it now but as you get older you aren’t as fit. You get a bit more tired. You may have arthritis. If you are doing a manual job like laying slabs or other heavy work you may struggle to continue.

My advice is pay in as much as you can as your employer matches it. Free money for you so to speak!

As a pp said try the calculators on line to get an idea of what you need to start paying in. It’s good you are thinking ahead. Many don’t.

The other thing to remember is that hopefully your salary will increase over time, and as your and your employer’s contributions are calaculated as a percentage of your salary, the amount you pay in will increase as well. I also tried to use a bit of any pay rise to increase my savings, both as cash savings and, when I could afford to, an extra 1% into my pension. These little things can add up to a lot.

The money advice service has a really good pensions calculator to show you what you could get at retirement based on what you're currently putting in. You may well get a shock at how low that is, I certainly did but as others have said at least you're thinking about it now.

Just to add to the excellent advice above, this is a big reason I wanted to get on the property ladder as early as I could. I had neighbours who could no longer afford their private rented flat as their income was fixed, but rentals in the area kept rising.

As I've got older, I've made sure I have a house where if my mobility took a nosedive, I wouldn't have to move - breaking an ankle was an excellent wake up call - bit I wouldn't recommend it!