Making sure your pension plans are on track can mean the difference between a good retirement and a great one. We’ve compiled a handy checklist for you to go through with your provider to ensure your pension is in shipshape.
What Type of Pension do I Currently Hold?
If you’re unsure, it is always worth checking what type of pension scheme(s) you currently hold. There are two broad categories of pensions: defined contribution and defined benefit.
Defined Contribution – this tends to refer to a pension to which you, and/or your employer, contribute. This will usually be through a group pension plan provided via work, or a personal pension such as a stakeholder or SIPP type arrangement.
Defined Benefit (final salary) – a defined benefit pension (also called a 'final salary' pension) is a type of workplace pension that pays you a retirement income based on your salary and the number of years you have worked for the employer.
What are the Total Current Charges I am Paying for my Pension?
Your current provider should always be open and honest about exactly what charges you are paying to hold a pension with them. These can vary dramatically depending on the type and age of your pension plan.
What is my Pension Invested in and What is the Risk Level?
It is definitely a good idea to check and review what exactly your pension is currently invested in. Your provider should also be able to provide you with the risk level classification for the investments to ensure you are fully aware of exactly how your pension is invested.
Can I Transfer my Pension if I Wish?
When contacting your provider, it is always worth checking whether there would be any penalties or guarantees that would be lost upon transfer of your pension.
Can I Transfer Partial Amounts From my Pension if I Wish?
Sometimes people may wish to only transfer a partial value of their pension to another provider, rather than the total value. Again, your provider will be able to confirm whether there are any limits or issues with this.
Does my Pension Contain any Guaranteed Benefits or Enhanced Benefits?
Some types of pension plans offer guaranteed benefits. These can vary depending on the pension, and often how old the policy is.
Here we’ve provided a few examples of acronyms you may come across. Please note, however, there are more types of guarantees available and when contacting your provider, they should be able to explain if a) you have any guarantee and b) what they entitle you to.
GAR (Guaranteed Annuity Rate) – if your pension scheme provides a guaranteed annuity rate, you might be able to achieve a higher level of annuity income by purchasing your annuity from your pension provider, rather than on the open market.
GMP (Guaranteed Minimum Pension) – a GMP provides a minimum level of benefit for individuals who contracted out of the State Earnings Related Pension Scheme (SERPS) via a salary-related scheme between April 1978 and 1997.
DB (Defined Benefit) – a defined benefit pension (also called a 'final salary' pension) is a type of workplace pension that pays you a retirement income based on your salary and the number of years you have worked for the employer, rather than the amount of money you have contributed to the pension.
What are my Retirement Options?
It is also worth asking your provider which methods are available when it comes to accessing your pension with them. Some providers may offer income drawdown, annuities or both, but it is always worth clarifying.
Please note, this is not an exhaustive list of relevant questions but a general guide to the types of questions to ask. If unsure, please speak with a financial advisor.
Disclaimer: The Royal Mint Limited is not authorised by the Financial Conduct Authority to provide investment advice and nothing on this website should be construed as investment advice.
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