Article 5 reasons to pay attention to your pension

Between the commitments and responsibilities of day-to-day life, it’s no surprise that some things never leave our to-do lists. Private and workplace pensions can be accessed from the age of 55 (rising to 57 in 2028). If you’re still a few years away from reaching this age, it might seem easy to put off managing your pension for another day. But given the significance of our pensions for a healthy retirement – it’s important that we pay attention now to better prepare for the future. Not only that, but there could be some real-time benefits to staying close to your pension pots too.

Here’s 5 reasons why being proactive with your pension(s) could benefit you now and in the future.

1.  To help you picture your future self

In our financial wellbeing research of over 10,000 UK respondents, we found that 50% of people struggled to visualise what they wanted their future to look like.¹ But when we have a concrete picture of our future self, we make better financial decisions for ourselves in both the short and long-term.

Engaging with your pension regularly might help you to paint that picture – it could help you feel more connected to your savings and drive you to think more specifically around your future goals and vision for retirement. We found that those who have a solid connection to their future self are also more likely to have a rainy-day fund, be less likely to have debt and more likely to own and pay off a property.¹ Our Best life tool can help you to visualise what your life could look like.

2.  You could save yourself time and effort

Throughout your working life it’s likely that you’ll move jobs a few times. This might mean that you end up with multiple pension pots from different providers. When it comes to retiring, you’ll need to contact each pension provider individually to request a payment. This should be much simpler and quicker to do if you’ve been keeping track of your pension pots throughout your career. By staying on top of your pensions, you should find it easier to manage these when you need to. It might also mean that you’ve less admin to go through, as you won’t need to spend time tracking down lost pensions. If you do think you’ve lost a pension, the Government’s MoneyHelper website outlines the steps you can take to find it.   

Some people also consider combining their pensions into one pot which could make it easier to manage. It may also make it easier to see exactly how much you’re paying in charges, as your fees won’t be spread across multiple pots and/or providers. However, combining a pension may not be the best option for you. You may lose features, protections, guarantees or other benefits – so make sure you compare products before transferring. It’s up to you to decide if this is the right decision for you. If you’re not sure, speak to a financial adviser – you can find one through the MoneyHelper website. There’s likely to be a charge for financial advice.

It’s important to remember the value of your combined pension pot can still fall as well as rise and the final value of your pension when you come to take benefits, may be less than has been paid in.

Any new funds you move your money into will have their own set of risks that will be detailed in the fund information available to you.

3.  It might boost your total savings

If you meet the minimum requirements, as outlined on Money Helper’s website, you’ll likely be auto-enrolled into your workplace pension – unless you’ve specifically opted out. While this is great for adding to your retirement savings, this alone might not be enough for the retirement lifestyle that you want. The Pensions Policy Institute has recommended that pension contribution rates should be 16% of our income each month –including a contribution of 12% from your employer.² However, the current auto-enrolment legislation means the minimum combined contribution required from you and your employer is only 8%.³

Paying attention to how your pension is growing can help you decide if you’re saving enough – and take action if you need to. You might find yourself more motivated to increase your monthly contribution or make one-off additional payments to help boost your savings pot. MoneyHelper’s Pension calculator can help you forecast whether you’re on track for the retirement you want. It can also show you how your yearly pension could be impacted by increasing or reducing your monthly contributions. 

Remember that when you check your pension pot, it might not always be on track. This is because the value of an investment can fall as well as rise and isn’t guaranteed. The value of your pension pot when you come to take benefits may be less than has been paid in.

4.  It could help you align your investments with your values

You may not have given much thought as to where your pension funds are invested. But did you know you can invest your money in line with your values? Fund factsheets and Key Investor Documents – available from your pension provider – have information on the type of funds your pension is invested in. You can decide whether this aligns with your principles and look to make changes if necessary. For example, if you wanted to avoid investing in companies involved in weapons or tobacco products.

We recommend speaking to a financial adviser to talk you through your objectives as well as the implications to switching funds. You can find out more about what responsible investing is on our Investing Responsibly page.

5.  To stay on track for your State Pension entitlement

Outside of private and workplace pensions, many people in the UK will be entitled to some form of State Pension from the Government. Whether you’ll receive the full amount or not is dependent on how much National Insurance (NI) you’ve contributed throughout your working life. You should be entitled to some State Pension if you’ve contributed over 10 years of NI, and the full allowance if you’ve contributed 35 years. A simple check on GOV.UK’s site of your National Insurance record will tell you whether you’re on track to part or all of the allowance.

It’s important to take time to review this, as you may be eligible to make additional NI payments if you’re not on course and this might make up for any shortfall. The sooner you check, the more time you’ll have to get back on track to receive the full State Pension. It’s worth noting that if you’re unemployed or unable to work for other reasons, you may be entitled to National Insurance credits from the Government. To find out more, read our article What is the State pension and how does it work?

Take control of your pension

Making a note to check in with your pension every few months could go a long way to staying on track for the retirement you want. By taking control now, you could develop a more positive money mindset, and  be more confident when managing your finances both now and in the future.

For more articles like this, visit our Money tips hub.