Final salary pension savers are being urged to get “retirement ready” after research revealed a lack of awareness of entitlements that may see some people miss out on income in later life.
The Pension Protection Fund (PPF), which completed the survey, said the results highlighted an acute lack of understanding and engagement among some savers about their defined benefit (DB) pensions.
DB pensions, which include final salary schemes and have been at the centre of the pension transfer mis-selling scandal of recent years, often provide a guaranteed income and other guaranteed benefits, and as such, are often described as “gold plated.”
What is the PPF, and what did its research uncover?
The PPF exists to protect final salary pension savers if their employer becomes insolvent, paying compensation to savers in such circumstances. As of January 2022, the PPF protects nearly 10 million savers across over 5,200 different pension schemes.
Its recent research highlighted several concerns, including three-quarters of savers with DB pensions being unaware of the protection the PPF offers in the event of their employer collapsing.
Among 2,000 DB pension scheme savers, PPF also found that:
- Less than half (49%) of DB pension savers were concerned about knowing what their pension was worth
- In contrast, 33% said they were concerned about not having enough to live on in retirement
Given these findings, pension savers must take action now to understand what’s in their pension pot and what they need to do to ensure they’ll have a pension income to meet their desired lifestyle in retirement.
The PPF’s research also found that more than a third of savers didn’t know if they could transfer out of a DB scheme. However, in most cases, Financial Conduct Authority guidance to financial advisers is that a transfer wouldn’t be appropriate anyway. If you have a pension or pension benefits worth more than £30,000, you must take financial advice if you are considering a pension transfer.
The PPF’s chief customer officer, Sara Protheroe, said: “It’s extremely worrying that so many people with DB pensions are unaware of the valuable protection available to them if their employer failed, and this may result in inappropriate DB transfers…
“We already know that the nature of retirement is changing, with people working and living longer, so it’s really important that individuals make 2022 their year to get retirement ready and take the time to understand how their pensions can help them achieve their retirement goals.”
PPF provides savers with four tips for getting retirement ready in 2022
As well as publishing its research, the PPF has provided savers with four tips to help themselves get their retirement fund in better shape in the next twelve months.
1. Engage with your DB pension provider
Dig out documentation, emails, or find your log in details for your online pension management platform. Check how much is in your pot and what benefits your DB pension will provide.
2. Speak to a financial adviser
This is the best way to understand how you can use your DB pension alongside any savings and other assets and investments to fund your retirement. The earlier you speak to someone, the more time you have to make changes to your retirement plan to ensure you’ll have the cash you need when the time comes.
3. Trace old pensions
If you left an employer a few years ago and had a DB or another workplace pension, the pension is still yours!
To find old and lost pensions, you can:
- Use the government’s Pensions Tracing Service
- Contact your employer, if they’re still in business, to ask for details about the workplace pension scheme you contributed to
If an old employer has merged with or been taken over by another business, contact the new business’s HR department. They should have all the necessary details and be able to point you in the right direction.
4. Speak to your current employer
Does your pension with your current employer mean little more to you than the deduction you see coming off your salary each month? Speak to your boss or the HR department where you work. They’ll be able to share details about your DB or other workplace pension provider and give you everything you need to get in touch with your pension scheme provider. If you find you’re way behind where you thought you’d be with your pension savings, you may be able to use additional voluntary contributions to boost your pension pot.
Make 2022 the year you get retirement ready!
If you’ve already transferred out of a DB pension, you could be entitled to compensation
Were you encouraged to transfer out of a DB pension and have lost benefits as a result? If your transfer and the consequences of transferring weren’t explained to you clearly and in full, you could be entitled to compensation.
Contact us today to get a free, no-obligation review of your pension transfer and take the first steps to getting the compensation you deserve.