How you can show your pensions some love

If you’ve seen our report into the gender pension gap, you’ll know that we’ve identified that it begins at age 28. Our mission was to understand more about when the gap starts, but also why, because that is the best way to consider steps and solutions to help close it, both now and for future generations of women.

Towards the back of the report we also outline a number of solutions for individuals, pension providers and policy makers. That’s the point – the gap isn’t just for individual pension savers to bridge alone. In fact, when we launched the report at the fabulous Affordable Art Fair, I deliberately asked the room what we all could do to help close it.

There are some quick and simple things we can do to show our pensions some love. As a woman who spends a lot of her time talking about pensions, and a former financial adviser, I’ve put together a five-point checklist to help you get started.

Find out what you’ve got

Before you can start any journey, you need to know where you’re starting from. When it comes to pensions, this involves digging out your online log ins or paper statements. Or as one of my colleagues* likes to say, “dusting off and opening that shoe box under the bed.”

Here are some questions you can ask yourself when reviewing your existing plans:

1. Do you have a pension pot that you’ll need to turn into an income, or a pension promise?
2. What age can you access it?
3. How much is it currently worth?
4. Where is my money invested?
5. Finally, does it have any special features or guarantees?

You could also use an online pension calculator to work out what your existing pension(s) might give you at retirement, based on different contribution levels. *Shhhh, but it’s Rachel Vahey!

Give your workplace pension an MOT

If you’re employed, your employer will usually add money into your pension alongside your own contributions. This is essentially extra pay for your future that wouldn’t be replaced if you opted out of a scheme. It’s well worth checking exactly how much they put in, because some employers will increase their contributions if you choose to save more yourself, up to a certain limit. If you’re unsure, your HR team can explain what’s available in terms of matched contributions.

Even if you’re not able to pay in more money at this time, it’s worth taking a few minutes to check which fund your pension is invested in and whether it feels right for you. Many women may have 30, 40 or even 50 years until retirement, which gives your investments plenty of time to grow and ride out any of the ups and downs stock market volatility can bring because you won’t need to access the pension money for many years. History shows that people who stay invested through those ups and downs should be rewarded over the long term.

With a workplace pension, your employer chooses an investment fund which is applied to everyone in the scheme regardless of personal circumstances. If you don’t make any changes, this ‘default fund’ is where your money will go. Default funds must have a cap on charges to keep costs down, but they aren’t tailored to you personally. Your age and goals are likely to be very different to some of your colleagues, so have a look at the options available within your scheme. You’ll have more control over how your money is invested and how much risk you’re comfortable taking.

Consider combining your pots

You might uncover several pension pots once you’ve complete step one in our checklist, or you might have a suspicion there is a lost pot out there with your name on it.

Some pension providers – including AJ Bell – have services to help you track them down and even combine them.

Even if you already know where your old pensions are, it’s a good idea to see how they are doing and think about combining them. That’s because having savings in one place puts you in the driving seat to make better decisions about your pension future. This could be whether you need to pay in more money now, review your investments, or simply help you reduce your costs. Different pension companies charge different amounts for managing and investing pensions. Combining your pensions may mean you can choose the right-priced plan and pay far less in charges over time.

Get to know how pensions can lower your tax bill

It might not be the right time to start shovelling money into your pensions, we do understand that there are competing pressures on your money. But thanks to tax relief, even small extra contributions can help you move out of a higher tax band or mean you’re eligible once again for child benefit or other support, while boosting your retirement pot. These extra contributions often come in at a far lower cost that you might think.

To pay in an extra £100 a month costs a basic rate taxpayer £80, and for higher rate taxpayers it falls to £60 thanks to tax relief. Just make sure you’re claiming everything you’re entitled to.

Some pensions give you the tax savings upfront. But if you pay into a SIPP or another personal pension and you are a higher or additional rate taxpayer, you may have to claim more income tax relief directly from the government.

Check your pension nomination

I don’t want to end on a morbid note, but this last point is super important. Most pensions are set up under trust and are not covered by what you’ve written in your will. You can nominate whoever you’d like to benefit from your pot when you die, split it between or even nominate a charity. You might see your pension nomination also called an ‘expression of wish’. Make sure you complete the nomination form and keep it up to date if circumstances change.