Pension Awareness Week 2024

What You Need to Know for a Secure Retirement

Pension Awareness Week is here, making it the perfect time to take control of your retirement planning.

This week is all about understanding your pensions and ensuring you're on track for a financially secure future.

At Totum Financial Planning, we believe your pension - and your future - shouldn’t be a mystery.

Whether you're uncertain about your pension or just want to ensure everything is in order, now is the time to reflect on your financial future. Let's start with the basics!


What Exactly Is a Pension?

A pension is a long-term savings plan designed to help you build funds for retirement.

While you’re working, you contribute money into a pension pot, which can be boosted by contributions from your employer and tax relief from the government. This money is then invested to help it grow, providing you with an income when you retire.

There are two key phases to a pension:

• Accumulation phase: This is when you're building up your pension pot through contributions and investment growth.

• Decumulation phase: This is when you start taking money out of your pension to support your retirement.


How Do Pensions Work?

The concept behind a pension is simple: save now to enjoy financial stability later.

You (and often your employer) contribute a percentage of your salary into your pension pot each month. The government helps by offering tax relief, which means some of the money that would have gone to tax is added to your pension instead.

Your contributions are then invested and the returns can help your pension grow over time.

When you reach retirement age, you can start accessing your pension in various ways. Depending on the type of pension, you might take a lump sum, receive a regular income, or use a combination of both.


The Different Types of Pensions

There are several types of pensions available in the UK, and knowing the differences is key to understanding how they can work for you:

Workplace Pensions

• Defined Benefit (DB) pensions: Also known as final salary pensions, DB pensions provide a guaranteed income for life based on your salary and years of service. These are less common in the private sector but are still widely offered in the public sector.

• Defined Contribution (DC) pensions: With DC pensions, typically both you and your employer contribute into a pension pot. The amount you receive at retirement depends on how much has been saved and how well the investments have performed.

Personal Pensions

• Self-Invested Personal Pensions (SIPPs): A SIPP offers greater control over how your pension is invested, giving you the ability to choose and manage your investments. This option appeals to those who prefer a more hands-on approach to their finances.

• Stakeholder Pensions: These are personal pensions with low charges and flexible contributions, designed to be simple and affordable for everyone.

State Pension

The state pension is a government-provided pension that pays a regular income when you reach the state pension age, as long as you’ve made enough National Insurance contributions.

It's important to note that the state pension alone may not be enough to live comfortably, so having additional pension savings is crucial.


Key Questions to Ask About Your Pension

Now that you understand the basics, it's time to ask yourself some key questions about your pension:

• Are you confident in your pension plan? Regularly review your pension to ensure it aligns with your retirement goals.

• Do you know what pensions you have? Many people have multiple pensions from different jobs. Tracking them all helps you understand your total retirement savings.

• Could there be any lost pensions? If you’ve changed jobs several times, you might have forgotten pension pots. It’s worth tracking them down!

• Are your pensions performing as expected? Checking the performance of your pension investments is key to ensuring your money is working for you.

• Could your pensions be working harder for you? Reviewing your contributions, fees, and investment choices can help you maximise your pension's potential.


Why It’s Important to Understand Your Pension Now

Many people delay thinking about their pensions until they’re close to retirement, but this can be a costly mistake. The earlier you start, the more time your money has to grow, and small adjustments now can make a big impact later.

Whether you’re starting your career or approaching retirement, Pension Awareness Week is the perfect time to review your pension. By understanding your current pension situation and making necessary adjustments, you’ll set yourself up for a more secure retirement.


Let’s Make Pension Awareness Week Count!

At Totum Financial Planning, we’re here to make pensions easier to understand and manage.

Got questions about your pension? We’re ready to help! Schedule a complimentary consultation today.

Let’s make Pension Awareness Week the start of a confident and secure retirement journey - together!

  Please note:

The value of investments can fall as well as rise and you may not get back the amount originally invested.

The FCA do not regulate will writing, tax planning and trusts.

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