Defined Contribution
Most Usdaw members will be in what we call Defined Contribution (DC) style schemes in their workplace.
These types of pensions are just like a regular savings plans, you have your own pension pot, you can choose where your money is being invested -and you can keep track of how your money is doing.
The real beauty of these plans is that generally your employer must contribute as well-if you think about it, it’s the same principle as “buy one -get one free!”
You can "opt-in" to your workplace pension
You must meet certain criteria to be automatically put in your workplace arrangement.
You must be between the age of 22 and your own State Pension Age and earn over £10,000 a year.
Did you know you can apply to join even if you don’t meet these criteria though? If you earn over £6,240 your employer must also pay a contribution for you as well.
The cost of living is squeezing many incomes so now is possibly not the right time for us to be thinking about paying more into our pots, but if you can afford to stay in, we would encourage you to do so.
Now might be a good time however to just take stock and consider what you have.
How to track down your previous pensions
Do you know for instance where all your pension pots are? Money Helper-government’s free pension guidance service has some excellent tips on how to go about this.
Try going online here, for more information https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-problems/tracing-and-finding-lost-pensions
Do you know what type of pension you have (DB vs DC)?
Check what type of pension you have -back in the day you might have been a member of a Defined Benefit (DB) scheme. These types of schemes guaranteed you a pension for life once in payment. Many schemes have closed but you might still have an entitlement.
DB and DC schemes are the two main types of pension scheme in the UK at present and they are governed by different rules and regulations. Try and find out what type you have -as you will be offered completely different options when you come to retirement.
Contact the pension administrator for an up-to-date statement.
Who will benefit if you die?
If you die before or after you access your pension pot whether it is a DB or DC pension, there might be some money available which can be paid to your beneficiaries.
Make sure you keep your “Nomination Form” up to date. Your circumstances can change-make sure your hard-earned money is going to be left to those who are important to you.
Telling your pension provider when you are going to retire is important
If you are currently paying into a DC pension, make sure you tell your pension provider (often a large insurance company like Legal & General or Aviva for instance) of when you are thinking of retiring. This might seem a long time off, but this can impact on your investments.
Currently you can access your DC pot from age 55 (up to age 75) unless you are applying for an ill health pension. This is set to change from 2028 and will increase to age 57 (unless your scheme has a specific protected retirement age). This change will impact anyone who was born on or after 6/4/1971.
The pension provider will generally start moving your investments into less riskier assets as you approach your chosen retirement date to lock in the growth your pot has accumulated over the years. However, if this happens too early you may lose out and your pot may not grow as well as it could.
If you have any questions about this article - or about your pensions in general - and you are an Usdaw member we have a free pension guidance service. Contact us on 0161 224 2804 or email us at [email protected]