Women have historically lived longer than men, but this is gradually changing. Life expectancy has continued to increase all round as all generations enjoy unprecedented wealth, better nutrition, healthier lifestyles and the benefits of advancing medical science.
People change jobs and employers change their names, but, more importantly, we all forget things from time to time. With that in mind, it is easy to lose track of pensions that you have paid into over the years. If you do not actively look for your lost pensions, then you take the risk of relying on them looking for you! This can be difficult for them to do if, for example, you have changed your name through marriage or moved home yourself.
Bringing your pensions under one roof
Most people, during their career, accumulate a number of different pension plans. Keeping your pension savings in a number of different plans may result in lost investment opportunities and unnecessary exposure to risk.
Some people don’t want a pension company deciding how their pension savings are invested – they want to control where their money goes and how it grows. In this scenario, a Self-Invested Personal Pension (SIPP) offers a solution. Very much a do-it-yourself pension, you choose what investments you want to put your savings into, and therefore keep control of your savings.
You could soon have a pension without asking for one!
Millions of workers are being automatically enrolled into a workplace pension by their employer. A workplace pension is a way of saving for your retirement that’s arranged by your employer.
There are two main types of occupational workplace pension schemes:
Defined-contribution schemes
A defined-contribution (DC) or money-purchase pension scheme is one that invests the money you pay into it, together with any employer’s contribution, and gives you an accumulated sum on retirement, with which you can secure a pension income, either by buying an annuity or using income drawdown.
Flexible drawdown is a special form of drawdown under which any amount of money can be withdrawn from the pension pot. There are two requirements you have to meet before undertaking this option: you must meet the minimum income requirement (MIR) and you must have stopped contributing to any pensions. As the name suggests, this option is more flexible than income drawdown. Qualifying for this option removes the cap on the income you can take.
How to use your pension pot for the years ahead
As you approach retirement, you will have to decide how best to use your pension pot for the years ahead. One of the ways of doing this is by entering income drawdown. Unlike an annuity, with income drawdown, your money remains invested and you take a pension income directly from it. This is a flexible way to take your pension benefits, although it may not be suitable if you want the security of income that an annuity offers.
The lack of professional financial advice can be costly
You only have one opportunity to shop around for your annuity. This is called ‘exercising the open market option’. Once you have committed to an annuity provider and started to receive an income, the decision can’t be reversed.
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