A majority of people in the UK have pension plans through their places of employment, and it’s important that you know how to get the most out of yours. There are certain measures that you can take right now to ensure that you get what you need for retirement. It is never too early to start thinking about this. The longer you want to start focusing on your pension, the less you will have when you decide to retire.
Deciding How Much to Contribute to Your Pension Plan
One of the first things that you will need to do is to decide how much you should contribute to your pension plan on a regular basis. You should try to put in as much as you possibly can to get the most from your plan. The more you contribute, the more you employer will put towards it. Take the time to run the numbers so you can determine exactly how much you can contribute from each pay cheque.
Employer Contributions
You also need to know how much your employer should be putting into your pension plan. All employers are required to contribute to their employees’ pension plans. Those who are auto-enrolled get 8% of their total contributions matched. You will be able to get all of the information you need on contribution levels as well as investments from your employer. If you work for a big company, you can refer to the HR department for these details.
Investing Your Pension
When you are determining how much of your pension to invest, you need to think about how long you have until you officially retire. If you still have a good 20+ years before retirement, you can take one more risks. If you make some bad investment choices, you will still have plenty of time to recover from them. It is, however, still important that you take the time to look over your investment options carefully.
If you are getting close to retirement, you need to focus on maintaining the value of your pension pot as opposed to taking high stakes risks. You should focus on low-risk investments that can still pay off, including government bonds.
While a lot of people simply let their scheme determine which strategy to take for investing their money, you can most likely select a different one. Take the time to look into some of your alternative options so you know exactly what they are. You don’t want to make any investment decisions before carefully reviewing your choices.
Growing Your Pension Pot
You should set realistic expectations when it comes to how much your pension pot is going to grow in the coming months and years. It all depends on the overall performance of the investments you have chosen. You will get a statement each year so you can see how much your fund has grown. It is important that you look at this statement so you can make your decisions accordingly.
Large vs. Small Pension Schemes
There is always the question of whether to go with a larger or smaller pension scheme, and it’s important that you make the right decision. The smaller schemes tend to have higher charges, and the larger ones usually have lower charges. You can use the Pension Quality Mark to recognize contribution schemes that are well defined.
Look for pension schemes that have a minimum contribution of 10% and 6% for employer contributions. By looking at these criteria, you will be able to choose a good pension scheme to match your needs.
Review Your Scheme Regularly
It is important that you spend some time reviewing your pension scheme on a regular basis so that you can ensure you have made the right decision. You should also make sure that the trustees that are associated with your scheme are reviewing it on a regular basis to ensure optimal performance.
There aren’t any requirements for governance if you are part of a contract-based scheme. In this case, a pension provider is hired to run everything. Any reputable employer will take a look at your pension scheme every so often. Your employer should have a governing committee in place as well.
What to do if Your Pension isn’t Working for you
If you don’t believe that your pension scheme is working for you, it is a good idea to contact the Pensions Advisory Service, which can help you with the information you need. You should also talk with your employer as soon as possible so you can discuss any concerns you might have. The final solution is to transfer your funds into a Self-Invested Personal Pension or SIPP. This will allow you to take full control of your pension so you can use it however you want.