Specialist Wealth Management And Legal Experts Give Their Number One Pension Advice

Pension Awareness Day takes place on 15 September; ahead of the event, experts from Irwin Mitchell’s Wealth Management and Tax, Trusts and Estates teams have given their top tips on what their number one piece of advice is for pension holders.

Pensions are a staple of working life, designed to provide a comfortable retirement, but with rising living and elderly care costs, it’s more important than ever to make sure your pension is operating at peak efficiency.

The pandemic has also affected many people’s pension planning – recent research from insurer Royal London found 40% of young people aged 18-34 had reduced or stopped pension contributions altogether, with affordability being the main reason across all age groups.

Irwin Mitchell’s Care Crisis report, published earlier this year, found that workers were on average needing to pay £575 more into their pensions to afford elderly care. Until the Government unveils a new social care system, there are easy ways to ensure your pension is working for you.

Our experts have considered what their number one top tip would be for pension holders amidst the uncertain backdrop – and how these small tweaks can make a big difference when it comes to your retirement.

Jason Mountford, a financial planner for Irwin Mitchell Wealth Management, notes how age should be factoring into your pension and how adventurous you could be. He said: “Find out how your pension pot is invested and decide whether this is right for you. If retirement is still a fairly long way off and your pension is invested too conservatively, you could be short-changing yourself in retirement by tens or even hundreds of thousands of pounds.

“Generally, the younger you are the more risk you can afford when it comes to investing your pension.  Have a chat with whoever holds your pension or a financial adviser if you want to see whether you’re in the right position to maximise your potential returns.”

Edward Tomlinson is head of the Financial Planning team at Irwin Mitchell Asset Management – his advice for those in the ‘pre-retirement’ age bracket. He said: “Adding to your pension can feel impossible when there are children, mortgages and other big life expenses to think about – and it just isn’t realistic for some to spare the money. If this is the case and you’re depending on your pension for an income in later life, I’d highly recommend beginning to think now about what it is you want your retirement to look like.

“What sort of income will you need to be comfortable? Are you on track to retire with that level, or do some gaps need to be filled beforehand? It’s important to make sure your pension is on track to meet your needs, so think now about what that means to you and adjust as needed.”

When it comes to later life and after retirement, there are still ways a pension can be put to best use – including for your family. Berin Jones, a senior associate from the Tax, Trusts and Estates team at Irwin Mitchell, notes pension pots are either low or completely free of inheritance tax bills: “There are some great tax benefits associated with pensions. A key one from an estate planning perspective is that pensions may incur no inheritance tax when you pass away, so your loved ones can have the pension pot and spend it as they need without landing a huge tax bill.

“Pensions are often overlooked in the estate planning process, but they can be a sizeable asset that’s worth taking into account when you’re planning ahead for the future. If you need help on knowing where to start, talk to a solicitor.”