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

By September 27, 2017Pension Advice
4 ladies discussing how to work out what your pension is worth

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.

Author pensionadvadmin

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