If your retirement is fast approaching and you’re still uncertain about your pension, it’s common to start feeling uncomfortable about your future.
This is more common than you might think, with Money Marketing revealing that 48% of UK savers aren’t sure if they’re on track for retirement or don’t believe they are.
Moreover, a further 47% stated they aren’t comfortable planning for the next phase of their lives.
Facing these major life changes can feel daunting.
This is somewhat understandable. Pensions often come with complicated rules, unfamiliar language, and decisions that may affect your finances for several decades.
Paired with the fact that you may have several old workplace schemes and your personal circumstances might have changed, it can become difficult to know where to begin.
This sense of uncertainty can sometimes cause you to disengage from your retirement planning altogether.
Yet, putting it off rarely makes the situation feel easier. The most effective way forward is often to deal with one part at a time.
With this in mind, continue reading to discover five ways to make managing your pensions feel less overwhelming.
1. Bring your pension information together
Pension planning can feel daunting when your savings are spread among several different pots and providers.
If you’ve changed jobs multiple times throughout your career, you may have several workplace pensions alongside any personal funds you’ve opened yourself.
Rather than trying to tackle everything immediately, it may be prudent to gather any information you can in one place.
For each pension, you may want to record:
- The provider
- The current value
- Your ongoing contributions
- Any employer contributions
- The investments held
- The charges applied
- The date from which you can access the funds.
Doing so could give you a much clearer sense of what you’ve accumulated overall and might even reveal a pension that you’d forgotten.
If you can’t find the details of an old workplace scheme, the government’s Pension Tracing Service could help you locate the relevant provider.
Just remember that you don’t necessarily need to make any changes at this stage, as you’re aiming to reduce uncertainty by establishing what you already have.
2. Consider the lifestyle your pensions will need to support
Once you’ve built this picture of your pension wealth, it can be helpful to start thinking about the lifestyle you wish to achieve when you stop working.
Your plans might include travelling, pursuing new hobbies, or simply spending more time with your loved ones.
Whatever lifestyle you hope to enjoy, these plans will influence how much income you need and how long your savings may need to last.
For instance, retiring earlier could mean relying on your pension for longer. Meanwhile, travel plans or regular financial support for family members may increase your spending during the first years of retirement.
It’s also vital to account for future rising living costs or the potential need to fund later-life care. Otherwise, you could leave yourself with a shortfall later on.
Read more: The “retirement care crisis”: Why you may want to plan for later-life care
Taking the time to establish these goals and priorities could make pension planning much less overwhelming.
Indeed, you may start to see how your retirement funds might support your specific plans, rather than simply viewing them as a collection of numbers.
This also gives you a more useful starting point for judging whether you are on track.
3. Review your progress without assuming the worst
If you’ve avoided checking your pensions for some time, it’s understandable that you may worry you haven’t saved enough.
Yet, making assumptions may only cause unnecessary anxiety.
You might even discover that your workplace contributions, investment growth, State Pension entitlement, and other assets leave you better prepared than you expected.
Conversely, a review may reveal a shortfall, and while this may feel disappointing, identifying it gives you the chance to take action now.
Depending on your circumstances, this could involve:
- Gradually increasing your pension contributions
- Paying in a lump sum
- Reviewing your retirement date
- Continuing to work on a reduced basis
- Adjusting your expected spending
- Using ISAs, savings, or other investments alongside your pension.
Even if retirement is approaching, relatively small adjustments now could still improve your position.
4. Take care before combining old pensions
Owning several different pension pots can make it more challenging to keep track of the overall value of your funds.
So, you may have considered consolidating them under one roof, as this could simplify administration and give you a clearer view of your total retirement savings.
However, it’s vital to note that transferring old pensions isn’t always the right move.
Some schemes may offer valuable benefits that you would lose by moving them, such as:
- Guaranteed annuity rates
- Protected tax-free cash
- Particularly competitive charges.
A new provider may also offer a different range of investments or charge more than your existing arrangement.
As such, it’s vital to understand what each pension currently provides and compare this with potential replacements before consolidating.
5. Ask a financial planner to connect the different parts
If you feel particularly overwhelmed by pension planning, it might be prudent to get in touch with a financial planner.
Read more: The value of financial planning: 5 ways it could help you achieve your long-term goals
At Verso, we can help you understand how the various aspects of your financial plan might fit together to help support your dream retirement lifestyle.
We could also explain any pension rules that matter to your decisions while demystifying some of the more complex terms.
For instance, we could help you understand:
- Whether your current contributions are likely to be sufficient
- How your pensions are invested
- Whether consolidation may be suitable
- When you could realistically retire
- How you might draw an income tax-efficiently
- How long your wealth may need to last.
Sophisticated cashflow modelling software can also illustrate how your finances may change over time.
You could see how retiring at different ages, changing your contributions, increasing your spending, or helping family members might affect your long-term plans.
These projections could ultimately give you a better understanding of any important decisions you have to make and where adjustments to your plans might be required.
To find out more about how we can take some of the anxiety out of planning for retirement, please use our search function to find your nearest Verso office, or for Verso Investment Management enquiries, please contact us at info@versoim.com or call 020 7380 3300.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning or cashflow planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.