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September 2017

4 ladies discussing how to work out what your pension is worth

How Do I Find Out how Much My Pension Is Worth?

By | Pension Advice | No Comments

Your expenditure and living costs are likely to be lower at retirement than at present.

However, it’s still vitally important to find out how much your pension is worth, and how much you are likely to need at retirement.

We’ll look at the latter further into this article. First, however, to find out how much your pension is worth, you will need:

  • To figure out what your combined income, savings and investments will be when you combine your State Pension, workplace pension(s), as well as any personal pensions and other income sources (e.g. renting a property).
  • To work out the tax you will likely have to pay when you retire.
  • Establish what your living costs and expenses are likely to be.

So, how do you find out how much your pension is worth? Read on.


Work Out How Much You’ll Need, First

Pennies on the table - that's one way to figure out how much pension you will need!

There are some great resources to help you work out what your retirement expenses are likely to be. The MoneyAdviceService “Budget Planner” is a great one, for example.

The key first step is to work out what your living costs are at the moment. Add up, for instance, your car payments, mortgage payments, child expenses, food bills and holidays.

Once you have a comprehensive list of your expenditure, you’ll then need to consider how your living costs are likely to change in, and approaching, retirement.

For example, are you likely to travel more abroad? This is likely to significantly raise your yearly expenses. On the other hand, if you have children you might expect them to have left home by then. So that might off-set this added outgoing, somewhat.

Additionally, will your mortgage be paid off by that point? Will your monthly travel costs be lower, since you are no longer commuting to work?

But then, perhaps your energy and water bills are going to go up, since you’ll be spending more time at home? Are care costs likely to feature in your expenses?

Once you’ve gone through your list, outlining likely ways your living costs are going to change in retirement, you should have a much clearer idea of how much your pension should be worth in order to support your lifestyle.


Second, Work Out Your Retirement Income Sources

It is likely that your retirement income will derive from multiple sources. When working out how much your pension is worth, consider the following:

  • Will you carry on working in some capacity after you retire? For instance, at the moment many retired people are home-sitting other people’s pets when they go on holiday!
  • Will you receive any benefits in retirement, such as housing benefit, council tax reduction, or pension credit?
  • Will you get any income from renting out properties you own?
  • Will you receive any dividends from your investments?
  • Are you likely to sell any of your assets, such as property?
  • Will you have any interest? (E.g. From pensioner bonds or savings).

In most cases, UK retirees tend to receive pension income from their State Pension, their workplace pension, and possibly a personal pension.

To find out how much your pension is worth, make a comprehensive list of your retirement income sources. If you’re unsure about what kind of pensions you have, or what they mean, see our helpful guide on pension types here.

Then, it’s time to move to the next stage.


Then, Work Out How Much Your Pension Is Worth

Old man asking how much his pension is worth

This is where things can get a bit complicated. However, if you can figure out your retirement income, you will get a lot more out of working with a financial adviser. This is because they can make a more accurate assessment of your finances, and help you identify your goals.

First of all, check how much you’ve contributed to your pension pot. To do this, check the pension statement your provider sent you (they usually do this once a year).

Sometimes, providers allow you to access this information online via a personal profile on their website. If you really can’t find the information yourself, then you can try contacting your provider directly.

You will also need to factor in any other pension pots you have paid into. This might include pension pots with previous employers, for instance. Again, check your contributions and any employer contributions.

Make a note of the values you find. If you think you have lost a pension, then this government service can help you find a missing scheme.

Next, add these pension pot values to your State Pension. Make sure you check how much you are entitled to from the government (this is usually based on your age and national insurance contributions).

At this point, you should have a good idea of your pension income sources, and how much your pension is worth. From here, you should subtract the retirement expenses you identified earlier from your identified retirement income.

This should tell you whether you have enough to fund your lifestyle in retirement, or whether you are coming up short. You will also need to factor in the taxes you are likely to pay at retirement, and subtract this from your figures as well.

If you are coming up short, then you will need to make some important decisions about whether you are going to cut back on expenses, work out ways to increase your income at retirement, or both.

A financial adviser can help you work through your options here. The advisers we refer people to here at are fully regulated by the FCA, and give independent, fee-based advice to their clients. The referral from us is free, and so is the initial consultation with the adviser.

Talking is free. Remember, you don’t lose anything by getting in touch.


Ways To Increase Retirement Income

There are a few options we can suggest here:

  • Take your retirement income later. For instance, you could “defer” your State Pension.
  • Put more into your retirement pot now, or start up another pot (e.g. a personal pension).
  • Take money from your pension pot later.
Small child with glasses, parody of someone trying to understand the jargon in UK pension advice

Understanding Different Kinds Of Pensions

By | Pension Advice UK | No Comments

Busting The Jargon Around UK Pension Advice

Pensions can be a complicated subject. Hence the need for professional pension advisers! So it’s understandable many people feel bewildered by the different types of schemes, investment opportunities and technical language banded around by pension advisers and the media.

To help our users, we’ve put together this handy list of terms explaining some of the 17 most important jargon used in UK pension advice circles. We hope you find it helpful.


#1 Auto Enrolment

Abbreviated from “automatic enrolment,” auto enrolment is an initiative by the Government which requires UK employers to enrol their workers onto a workplace pension scheme. This change is being phased in, but all companies are expected to be complying by February 2018. Presently, “eligible workers” for auto enrolment count as employees aged at least 22 years old, who earn over £10,000 per year, and who work in the UK.

#2 Workplace Pension

This is a broad term to describe any pension scheme set up by an employer for their employees. They are sometimes called company pensions, or occupational pensions. There are different types of WP pensions which are covered in more detail below, including defined benefit pensions and defined contribution schemes.

#3 State Pension

Houses of Parliament, where legislation on UK pension advice and the state pension is made

The state pension is an income provided to you by the UK government in retirement, funded by national insurance contributions. It is not affected by how much you earn across your lifetime, or your marital status. Rather, it hinges on your own record of NI contributions. Presently, the law states you need to have been paying NI for 35 years to qualify for the full state pension.

#4 Annual Allowance

This is the amount of money you can put into a defined contribution pension each year, whilst also receiving tax relief. Currently, this annual allowance stands at £40,000 and applies across all of your pension schemes.

#5 Lifetime allowance

At present, there is a legal limit (“lifetime allowance”) of £1m on your pension fund’s value before it loses its tax-free status. This limit applies to your defined contribution pension schemes, as well as final salary plans. If you are set to earn an annual income of £50,000 in retirement, you face being charged 55% on any income above the cap.

#6 Defined Benefit /Final Salary Pension

Men and women traversing an office concourse. They need UK pension advice!

Under a defined benefit  scheme, an employer offers you a guaranteed retirement income. This can be based upon your salary at retirement (sometimes called “final salary” scheme), or upon your average salary over the course of your career.

#7 Defined Contribution Pension

Under a DC plan, you put a proportion of your salary into a pension pot every month. Your employer also makes contributions into the pot. Sometimes employers match their employees’ contributions up to a percentage limit. Other employers might offer a flat rate regardless of your contributions (e.g. 3% of your salary). There are many choices available to you when you have a defined contribution pot, so getting UK pension advice from a reputable independent financial advisor can be a good idea.

#8 Stakeholder Pension

A type of defined contribution pension, a stakeholder pension (SHP) must meet a minimum set of conditions set out by the UK Government. For instance, they are designed to be highly accessible to lots of different people (e.g. those on low/middle incomes), portable if you change jobs, have lower minimum contributions, and have a cap on charges

#9 Personal / Private Pension

Man and woman in a cafe discussing auto enrolment and UK pension advice

This is a kind of defined contribution pension, where you choose the pension provider and then make regular contributions to build up a pot. The provider will usually invest the pot on your behalf, and the value of your pot at your retirement will depend on the fund’s investment performance, inflation, your circumstances and your contributions.  You can set one up even if you currently have a workplace pension. When you retire, you might want to use the pot to buy an annuity, or engage in income drawdown. These are explained in more detail below.

#10 SIPP

A Self-Invested Personal Pension (SIPP) is a form of personal/private pension, where you are allowed to invest in a wider range of assets. This gives more freedom and flexibility to people who want to manage their own funds. On the flip-side, the charges can be higher than they are for personal pensions and stakeholder pensions.

#11 SSAS

A type of company pension, a Small Self Administered Scheme (SSAS) is usually available to a small number of senior staff and directors at a company. It often allows an employer much greater access to a wider range of investment opportunities for the scheme’s assets (e.g. purchasing the company’s premises and leasing them back to the business).

#12 Annuity

At the point of retirement, you might want to use your pension pot to buy an annuity from an insurance company. This is a once-in-a-lifetime transaction, which buys you a guaranteed income for the rest of your life. The income you get will depend upon a range of factors, an important one being your provider’s rate (which might be higher if you have poor health). There are different types of annuity, including “single-life” annuities and “enhanced” annuities. Speak to a qualified UK financial advisor in order to get professional pension advice in this complex are.

#13 Income Drawdown

When you retire, you are usually allowed to withdraw up to 25% from your pension pot as a tax-free lump sum. The rest, you might choose to invest and also take money from in order to provide a retirement income. This is called “income drawdown”, and is an option if you are aged 55 or over with a defined contribution pension. There are different kinds of income drawdown, including “capped drawdown” and “flexible” drawdown. The risks are also typically higher than buying an annuity, since your money is usually invested in the stock market. Again, these factors make it a good idea to consider getting UK pension advice from a specialist financial adviser if you are looking at income protection as a serious option.

#14 Estate

A beautiful home, where the residents need UK pension advice on IHT

This is the term used by the Government to describe all of your possessions, property and money. It is a particularly important aspect of UK pension advice at the point of your passing, as the value of your estate will affect your exposure to inheritance tax (explained below).

#15 Inheritance Tax (IHT)

When you die, the Government imposes a tax upon your estate (defined above). At the moment, this is usually 40% on the value of your estate above £325,000. However, there are many factors which determine how much inheritance ta (IHT) you will have to pay. It’s therefore important that you consider getting pension advice from a qualified, experienced UK financial adviser who can help you sort through the issues and identify your tax liability.

#16 Nil Rate Band

This refers to the cut-off point after which the value of your estate is subject to IHT. This cut-off point is currently £325,000 (as mentioned in the section above), and applies to each individual (meaning each partner in a marriage / civil partnership has their own NRB). As of April 6th 2017, however, an additional “residence nil rate band” has come into effect. This is described below.

#17 Residence Nil Rate Band

Sometimes called the “additional threshold”, the residence nil rate band is an extra, available nil rate amount on top of the NRB described above. It applies to deaths after April 6th 2017, and comes into force when you leave your residence (or sales proceeds thereof) to your descendants after you die. This area of IHT can get incredibly complicated, especially when downsizing comes into the picture. It can therefore be a good idea to receive expert pension advice from a UK financial adviser. can refer you to someone local, regulated and experienced advisor here.

Elderly man pressing hands against the wall, talking about defined benefit pensions advice

Defined Benefit Pension Transfer Advice – A Leap Of Faith?

By | Defined Benefit | No Comments

Three decades ago, it wasn’t uncommon to speak to someone with a defined benefit pension.

Today, these schemes are rarer. An aging population and a more mobile workforce has led many companies to offer employees defined contribution schemes instead. These are commonly seen as less costly for the employer, although there are certain advantages for the employee as well.

As of April 6th 2015, UK citizens over the age of 55 have been allowed to access their defined contribution pension pots. If you hold a pension like this then you need to carefully consider getting defined benefit pension advice from a qualified, experienced financial adviser regulated by the Financial Conduct Authority. If you’re looking to speak to a local adviser with these qualification, then we can put you in touch for free.

Defined benefit plans (or final salary pensions) provide a guaranteed income to a retired person on retirement. The annual amount is usually determined by factors such as years in service at the company/organisation in question, and your earnings during your career.

Often, these schemes account for inflation and have provisions for the recipient’s spouse. Together, these features of defined benefit schemes lead many experts to argue that they are amongst the most valuable pension schemes around these days.


Pros To Consider When Thinking About Transferring

Obviously, the big advantage in transferring is the potential pension freedoms on offer with a defined contribution scheme.

Sometimes people want to access their money in their 50s, but their defined benefit scheme prohibits them from accessing it until they have reached their 60s. Others want to reduce their liabilities, and are enticed by an ETV (enhanced transfer value) where the scheme’s trustees pay. For some people, they might no longer be employed at the company with the scheme, and want to take a lump sum due to having other pensions with different employers.

Whatever your reason for thinking about a transfer, getting professional defined benefit pension transfer advice can often help you think through the issues more clearly. This may particularly be pertinent to you if you have a large pension pot, because you might be tempted to withdraw a big lump sum early without considering the true value of your defined benefit package.

Bear in mind that if your pot is worth over £30000 and you are considering a transfer out of your DB scheme, then the law requires you to seek defined benefit pension advice.

The important thing to look out for when thinking about a pension transfer is cold calling about pensions. With the rise in pension investment scams in the UK, cold calling and texts from businesses about pensions is set to be banned in the UK later this year.

So if you did not expressly ask to be contacted from a company in this way, or you do not have a pre-existing relationship with the company in question, be very careful. At, we are extremely careful with any information you might pass onto us, and will only ever refer you to a local, qualified financial adviser regulated by the Financial Conduct Authority.

One big reason many people are seeking defined benefit pension transfer advice is due to the transfer values currently on offer for DB schemes.

Xaffinity, for instance, gives the example of a 64 year old DB scheme member. In this scenario, the gentleman’s scheme entitles him to £10000 per year on retirement after the age of 65. If he was considering his transfer value in June 2016, Xaffinity claims he could have got £210000. This year, however, the figure could be as high as £241,000.

Others point to possible interest rate rises looming, which could make transfer values fall. This, it is argued, adds incentive to seek defined benefit transfer advice as soon as possible.


No one really knows what will happen, but it’s important that your decisions about a transfer are grounded in objective facts and sound, comprehensive information. If you want to talk to a professional, local and independent financial adviser about your defined benefit transfer options, then we can connect you for free.


Cons To Consider When Thinking About A Transfer

Clearly, the biggest thing you are potentially giving up when switching away from a defined benefit pension scheme is a guaranteed retirement income.

You also get a good measure of peace of mind from a DB plan, since responsibility for working out the investments lies with the scheme provider. Many people like the feeling that someone knowledgeable is looking after their retirement finances on their behalf.

When you switch to a DC scheme, you suddenly bear a lot more responsibility for discerning which investments are right for your retirement, and what strategy you should adopt for your investments and savings. It can be quite daunting and overwhelming, but that’s where seeking professional advice from a trained, qualified financial adviser can really help.

Whatever you do, do not take a leap of faith with your pension. Make sure you are as confident as you possibly can be about whether or not the decision to transfer is right for you. By seeking independent, defined benefit pension transfer advice with a financial adviser, this is certainly possible.