What could be the best way to provide for your grandchildren?

A recent study has revealed the worrying statistic that over a fifth of all people with multiple pensions have lost track of at least one, with some admitting to have forgotten the details of all of them. With around two thirds of UK residents having more than one pension, this amounts to approximately 6.6 million people with no idea how much they’ve put away for their retirement. Double the amount of people admit to not knowing how much their pensions are worth.

It’s an undesirable side effect of the modern working world. Whereas in previous generations someone might stay at a single employer for their entire working life, the typical worker today will hold eleven different jobs throughout their career, which could potentially mean opting into the same number of pensions through as many different providers. The new legal requirement for all employers to offer a pension scheme through auto-enrolment is likely to add further complexities.

As a result, the Pensions Dashboard is set to launch in 2019 in the hope that it will make it easier for savers to keep track of their pensions in one place. Until then, however, there are four relatively simple steps to help you track down information on any pensions you’ve forgotten about:

1. Find your pension using the DWP Pensions tracing service at www.gov.uk/find-pension-contact-details. Start by entering the name of your former employer to discover the current contact address for them. You’ll then need to write to them providing your name (plus any previous names), your current and previous addresses and your National Insurance number.
2. In the case of a pension scheme which hasn’t been updated for a while, you’ll be required to fill out an online form to receive contact details. You’ll be required to give your name, email address and any relevant information to help track down your pension details. This could include your National Insurance number and the dates you worked for the company.
3. You can also receive a forecast of your State pension either online or in paper format by going to www.gov.uk/check-state-pension. After entering a few details to confirm your identity, you’ll be told the date you can access your State pension and how much you’ll receive.
4. Finally, and most importantly, once you’ve managed to track down all of your pension information, get some advice. Consolidating your pensions might be tempting to make managing your savings easier, but you also want to make sure you don’t lose out on any benefits by doing so. Before you make any decisions regarding your pensions, seek professional independent advice on what to do next.

Richard Harrington, who was made pensions secretary by Theresa May soon after she assumed office as Prime Minister in July last year, recently wrote an article for This Is Money divulging his spending tips for 2017. It’s a piece littered with what could be called ‘financial advice’, so what does the new minister recommend we do with our wealth this year?

Harrington’s first piece of advice is to look at your pension, even if you’re not going to be retiring for many years to come. The government has set up a website called ‘Check Your State Pension’, which can be found at www.gov.uk/check-state-pension and allows you to see an estimate of your state pension’s worth and when you’ll currently be eligible to receive it. There’s also a Pension Tracing Service set up by the government at www.gov.uk/find-pension-contact-details to help you identify pension schemes you’ve paid into in the past of which you may have lost track.

The article also advises those already in retirement to look into whether the State Pension Top Up Scheme will benefit them. The scheme allows those who reached state pension age before 6th April 2016 to make a one-off payment to increase their retirement income by up to £25 a week, but it’s only available until the end of the current tax year.

Other key pieces of advice from Harrington include urging younger earners to leave their pensions alone to ensure contributions made now have decades to build up interest, and looking into whether your employer will match any increases in pension contributions you decide to make.

The pensions secretary also warns against the many pensions scams still operating within the UK, advising strong caution against anyone offering attractive rewards for investing pension savings. If it seems too good to be true, it probably is, so do your research thoroughly and check with the Financial Conduct Authority to avoid losing your hard-earned money.

Harrington ends his article with a reminder that the UK has no set retirement age and that over 1.2 million over 65s are still employed, so if you enjoy your job there’s no compulsion for you to retire immediately. Delaying your state pension if you choose to carry on working can give your income a healthy boost when you do decide to retire.

The ‘triple lock’ on state pensions has protected the older generation’s income since 2010, guaranteeing that pensions will rise each year in line with the highest of either the average earnings, the consumer price index, or 2.5%. But the triple lock’s days look increasingly numbered, with an increasing number of financial and political figures calling for it to be scrapped.

Back in November 2016, the Work and Pensions Committee criticised the triple lock, describing it as both “unfair” on the younger generation and “unsustainable” in the long term and calling for the new state pension and basic state pension to be linked to average earnings alone. They also proposed the development of a formula to protect pensioners during periods where earnings are lower than price inflation.

More recently, former pensions minister Ros Altmann has denounced the triple lock on her blog as “a lazy way of claiming to offer pensioners brilliant protection” which is “increasingly unfair”. She goes on to explain: “If the new state pension (designed to always be above pension credit level) remains triple locked, while pension credit only increases with earnings, then the poorest and oldest pensioners will become relatively poorer”.

Responses to the review of the state pension by former chief of the Confederation of British Industry John Cridland have also seen calls for the triple lock to be dropped. A number of respondents called for the Cridland Review to make major changes to the state pension system, including a move away from the triple lock and towards indexation in line with earnings.

In his Autumn Statement last year, the chancellor Philip Hammond indicated that the triple lock would remain in place until at least 2020, when the next general election is expected to take place. If the pressure continues to mount against it, many feel the government may be forced to remove the triple lock much earlier, with some predicting its demise before the end of 2017. Labour have recently come out in support of the triple lock, however, pledging to keep it in place until at least 2025, making the future of the mechanism even more difficult to predict.

Recent statistics from City of London Police suggest that losses due to fraud after pension freedoms were introduced could be around 25% higher than was initially estimated.The figure originally reported to the force for the first six months from April 2015 was £10.6 million.This figure has recently been revised to £13.3 million following updated statistics, due to the updating of reports by victims to reflect the full amounts lost. The new figure demonstrates a 146% rise year-on-year in reported fraud from the £5.4 million figure recorded during the corresponding period during 2014.

The figures have played a large part in the call for a complete ban of cold calling in the pensions sector, with a petition to the Government having attracted well over 7,000 signatures at the time of writing. Those in the pensions industry have criticised the Government for ‘sitting on its hands’ with regards to taking action against pension scammers.

“The good financial advice companies don’t need to cold call. Government services don’t cold call”, explains Michelle Cracknell, head of the official government-funded Pensions Advisory Service. She went on to refer to the number of calls we all receive about PPI and whether we’ve had a car accident but explained that this would be coming to an end under new regulation, making pensions the next potential sector for scammers to target. She was adamant that putting a ban on cold calling would give customers added protection, as it would help vulnerable people to know that any cold call they received about their pension was suspicious.

It is estimated that over 10 million pensioners are now being targeted every year by cold callers, a figure which has risen considerably since the introduction of pension freedoms. As scammers often put the money through several companies based overseas, this makes it incredibly difficult for investigators and forensic accountants to identify the criminals and where the money has come from. Mrs Cracknell admitted that her organisation has been forced to advise those who contact them about being scammed that they have virtually no chance of retrieving their money.

The latest figures surrounding the pensions lifetime allowance (LTA), which governs how much can be placed in a pension pot whilst still claiming tax relief, suggest that a considerable number of middle-income earners are being hit by the lower threshold. The amount collected from pensions exceeding the LTA by HMRC during the 2015-16 tax year came to £126 million, close to two thirds more than in the previous year. The number of pensions breaching the LTA limit also went up from 1,482 to 1,539 this year.

The LTA was set at £1.8 million in 2011-12, but has since decreased over subsequent years to the current £1 million threshold. This means that exceeding the LTA is increasingly becoming an issue not just faced by those considered to be ‘super wealthy’.

The current LTA level allows an income of around £45,000 for those retiring at 65. A general rule of thumb can be to aim for an income in retirement of around two thirds of that you are earning when you finish work, so a £45,000 pension income would be sufficient for someone who was earning around £68,000. Whilst this figure is somewhat higher than the current average UK salary, it’s also not a figure which is the reserve purely of the elite, penalising those on middle incomes.

Those with higher percentage returns on their savings are also likely to breach the LTA earlier. This means that the current limit comes down hard not only on the wealthy, but also on those who have made wise pension investments in order to enjoy a better return on their savings. As such, the potential charges for breaching the LTA may lead to those approaching the point at which they want to retire needing to stay in work longer due to the constraints on their retirement income.

If you have any questions about the potential impact of the LTA on your own retirement income, please feel free to get in touch with us directly.

According to recent research, the introduction of pension freedoms has led to many thousands of people taking out large sums from their retirement funds, then leaving it earning them next to nothing in low-interest accounts. The figures from Citizens Advice who carried out the study suggest that around three in ten people are currently doing this, with the move appearing to be just as common amongst those with smaller pensions as those with pots valued at over £100,000.

As well as impacting upon the returns seen from their savings, these people could also be inadvertently losing a chunk of their pension through taxation. Only 25% of a person’s pension fund can be withdrawn without incurring tax, with anything more than that taxed in the same way as income. Particularly large withdrawals could therefore result in a sizeable tax bill, as well as potentially pushing those paying basic rates of tax into the higher-rate bracket.

Other perks that may be lost through withdrawing pension funds include capital gains, which are tax-free within pensions, and protecting retirement savings from inheritance tax. If the money is moved into a current account, it becomes part of an individual’s estate and therefore will possibly incur death duties.

Part of the problem is that many see pension schemes as complicated, with their bank or building society account looking like a simple alternative where their money can be easily accessed. A ‘Retirement Quality Mark’ is set to be launched in September to help savers with the best ways to access their savings without sacrificing the benefits a pension fund provides.

Whilst the findings are concerning, it is worth remembering that there are many people who have taken advantage of pension freedoms since they were introduced last year and have been able to pursue interests and investments in a positive way. Withdrawing larger amounts from your pension pot in one go can be hugely beneficial as long as you do so with a plan set out to ensure you are using the money wisely and not opening yourself up to additional taxation that could have been avoided. If you have any questions around accessing your pension, please feel free to get in touch with us directly.