Making the most of your pension
Making the most of your pension
Hello and welcome to today's presentation.
My name is David Rickus and I'm part of the Member Presentations team at Legal & General. I'm your host for today's presentation and I'll be joined by my colleagues Colin and Charlotte.
We're going to talk today about making the most of your pension.
Today's session will run for about 30 minutes and I'd like to make you aware that we're unable to take questions today, however we have set up a dedicated web page where you'll find answers to the questions that come up most frequently and in sessions similar to this one and you'll find that web page at legalandgeneral.com/pensionquestions
If you have any questions about your individual plan, then please contact our helpline on 0345 070 8686. Please be aware that call charges may vary and that calls may be monitored and recorded.
So, in terms of today's session, we're going to be focusing on four main areas. Firstly, understanding pension savings and how it works. We will then look at managing your retirement savings. We'll look at knowing all your pensions and how you can find out about them and finally, we'll look at how you can review your savings to ensure that you're on track to achieve your retirement goals.
Before I hand over to Colin and Charlotte, I just need to cover some important points.
Please be aware that this is a general pensions education session and shouldn't be regarded as financial advice. The information we're going to discuss will be based on the 2023/24 tax year, the law, tax rates and any allowances may be subject to change in the future and in terms of investments, these can go down as well as up, what you get back isn't guaranteed and you may get back less than you've paid in.
So, I'll introduce my colleagues, Colin and Charlotte. Colin, over to you first.
Thanks, David. Hello, I'm Colin. I enjoy helping our customers understand their pension and hopefully demystifying pensions. I also think it's important to encourage people to take action. So, to do something positive for your own future.
My name is Charlotte and I work with Colin delivering presentations and I think one of the things I really enjoy is people having the opportunity to take time out of their busy working life and actually think about them and their own future. And as you say, Colin, hopefully take action too.
Okay. Thank you both.
So, moving on to our first topic, understanding how pension savings works. Colin, what is it that can make this difficult for audience members?
So, in my experience, David talking to members, there's a real range of knowledge where pensions are concerned so we meet people who know a great deal about pensions, but equally we meet people that find pensions very confusing and I think one of the barriers to being a little bit more engaged with your pension can be a feeling that you don't understand it.
So, I think if you can remove that barrier and help people understand their pension then hopefully that will encourage them to feel a little bit more confident and to get a little bit more engaged.
Okay, great. Well, with that in mind, Colin, our audience members today have a workplace pension with Legal & General, which is a defined contribution or DC pension as it's often termed. Could you just explain to our audience members how a DC pension works?
Certainly. So, the pension industry, I think is great at coming up with acronyms like DC for defined contribution, but the way I like to look at my pension is that it's really a long term savings plan. So fortunately, my employer pays into the plan and I also make a personal contribution and the government helps as well because they give me tax relief on the contributions that I pay in. And those contributions are what we call invested and pension schemes have to have a default investment, which is where your money's invested if you don't want to make an active investment decision. And what determines what you get back from your Legal & General pension is how much you save and how long you save for, the return on your investments, less any charges that are levied to manage the scheme and the investments and what you ultimately decide to do with the money and when you decide to sort of access your pot, as it were.
You have to be at least age 55 at the moment to access a workplace pension unless it's due to serious ill health when you can sometimes access them sooner. And the government is actually increasing that minimum retirement age for workplace pensions to age 57, from April 2028. So that may have an impact on some members of our audience today.
Okay. Thank you, Colin.
And could you just outline some of the benefits of saving into a workplace pension?
I think one of the key benefits is just recognising that there will come a time when all of us, you know, potentially will need income to replace our earned income. So, if we fully stop working, we need some income or we might go part time and need to supplement that income in some way. And obviously the workplace pension is a kind of key part of your strategy for making that adjustment. And I appreciate that for some people it may seem a long way away. For some people it may be a little bit more, more imminent.
So that's certainly a key benefit. But in terms of the practical benefits, with auto enrolment legislation now subject to certain criteria employers, have to pay minimum contributions into pension plans, so you get the benefit of your employer contributing towards the cost of your retirement years. Obviously, the tax relief, again, HMRC want you to save for your retirement and will give you tax relief on pension contributions. Then also if you die before you access your pension, not particularly cheerful topic, but if that were to happen, there's a pot of money that can provide benefits to beneficiaries so it provides some protection for your nearest and dearest as well as for your own personal future.
Of course, what you're hoping with the money that you save on a monthly or regular basis is that over time your contributions grow in value and you get investment returns. But of course, as you mentioned at the start, David, that isn't guaranteed.
Are there any limits our audience members need to be aware of when it comes to saving into a workplace pension?
Yes. So, there are some limits on the amount of tax relief that you can receive when you save into a pension. And I think the reason it's important to be aware of them is that if you do exceed your allowances, you may have to pay a tax charge. And I guess it's fair to say that most people would prefer to avoid paying a tax charge if they can.
So, there's something called the annual allowance, and that's the maximum amount that you can save into all your pensions in a tax year. It includes any contributions you make personally and any contributions from your employer as well. Good news for this tax year is that in his recent budget statement, the Chancellor announced that that allowance would actually increase. So, it was £40,000 last tax year but for the current tax year, it's increased to £60,000 and there are some special rules where you can sometimes carry forward unused relief as well that may or may not apply.
In addition to the annual allowance, there's a number of additional allowances, almost some special case allowances.
There's what's known as the tapered annual allowance and that can apply to high earners. So, if your income in a tax year is £200,000 or more, depending on your total sort of tax or income position, you may see a reduction in your allowance and it can taper down to a minimum of £10,000 depending on your total income.
In addition to the tapered allowance there's also something called the money purchase annual allowance,
and that only affects you if you access your Legal & General or other defined contribution pension plan
in certain ways and intend to continue to save. So you actually want to carry on saving into the plan. If that does apply to you, then the current limit for the current tax year is £10,000 and actually last tax year it was £4,000.
So again, there's been an increase in the minimum allowance, which is good news for retirement savers.
Perhaps the final thing just to mention is that there has historically been what's known as the lifetime allowance,
which was a cap on the maximum amount that you could save into pensions across your working life - for this tax year it's only impact really is that it can restrict the maximum tax-free cash that you can take from your pension.
But the great news is that from next tax year, the Chancellor’s actually announced that it will no longer continue to apply, which is great news for pension savers. So, we can all sort of save into the pension without having to worry whether or not we exceed a maximum lifetime allowance.
Okay. Thank you, Colin. I think we'll move on to our next topic, which is managing your retirement savings. Charlotte, why is it important for members to be thinking about this?
I think it's really important that members do manage their retirement savings and picking up on something Colin mentioned a moment ago, it will be our replacement income one day. So, it's a really important part of your finances and as with any of your finances, it's important that you're managing them. But I guess for lots of people, getting started with the task of managing their retirement savings is often the problem and kind of how do I go about it and where do I go? So, it's much easier than it used to be. First point, so much easier than it used to be in our new online world, we don't have to dig around in the filing cabinet anymore. You can usually access the information you need online. We'll explain that today. So really do just get to grips and learn how to manage your retirement savings. It's not as difficult as people think.
Okay. Taking that on board, Charlotte; Legal & General has an online portal for members, called Manage Your Account often referred to as MYA. What does Manage Your Account allow members to do?
So, it allows a member to see the value of their pension savings, but also to have control over a number of different elements of their pension account. So, one of the features that members can do is update us on the year that they're planning to retire, so the actual date that they might be planning to retire, which may become clearer, as your plans become clearer, you can also manage your investments here. Colin mentioned earlier that pension savings are invested. So if you want to see the detail of that, review your investments, review other investments that may be available to you or even make an investment change, You can, all from Manage Your Account, you can also access really useful planning tools that can help you to start planning for the future and make pension transfers for Manage Your Account as well, Something I know we're planning to cover off today. So, lots of really useful features, all of which will help you to feel in control.
Okay. Thank you, Charlotte. Yes, a lot of features there. In case any of our audience members today haven't already done so - How can they access Manage Your Account?
So, everybody will be able to access Manage Your Account by going to So MYA is short for Manage Your Account.
If you've never used Manage Your Account before, you will be required to register. To register you'll need your customer reference number and you’ll find that reference number on any documentation that you have about your pension or any communications you've received about it after you've been through the registration process it's then really easy to get logged in. And don't worry, if you forget your password, you can simply have an email with a code sent to you, so you can get straight back in. So really easy.
Now, some of our members may have access to a single sign on process, which in short means that if you're within your employer's intranet site or secure benefits portal, depending on which they use, then you may be able to get straight into the details about your pension account with Legal & General, if this has been set up. So you wouldn't, in that instance, be required to register or log in to see that.
Okay. Thank you. And one of the important features in Manage Your Account is giving members the ability to keep their beneficiary information up to date. Could you just explain why that's so important and how a member can do that within manage your account?
Okay. So, it's important because you are essentially then protecting your loved ones. So ensuring that the money that you've saved goes to the people that you need it to. You can update that record in Manage Your Account - that can be done by completing what we call a nomination of beneficiary form. It's a digital online form that will allow you to tell us who you'd like that money to go to, which can be more than one person. You just need to tell us the percentages that you'd like to allocate to each of those individuals. Really important as life changes, to update us, if something changes and you want to allocate it to somebody else. And just do be aware that Legal & General or your scheme trustees may have some discretion about who that money goes to.
And Colin, I know that very recently we were talking and you were telling me that you've been using Manage
Your Account for a number of different reasons. Would you mind sharing that with our audience?
Certainly. So, one of the features that I find really helpful on Manage Your Account, it’s just a great way of keeping an eye on the value of my pension pot, so in much the same way as I from time to time like to have a look at my bank account and see how that's coming along. I like to take a look at my pension. I think particularly with everything that's going on in the world today and we know that markets have been volatile, obviously, important not to make a knee jerk reaction and think very carefully before you make changes but I think it's just nice to keep an eye on things, just gives you that sense of how things are coming along.
The other thing that I've done relatively recently is I actually did what you've talked about Charlotte, which is make some changes to my nominated beneficiaries. So again, just tighten up my finances a little and I use the process that you describe, so I went and used the online form and just sort of tweaked what I'd put previously and submitted the form and it was nice and straightforward and a good feeling to know that everything is up to date and in order.
Thanks, Colin. Okay. Yeah, thank you for that. I think we can move on to our third topic now, which is getting to know all your pensions. So, Colin, could you just explain to our audience members today why this is so important?
Yeah, I think it's important to recognize that what you receive in retirement is going to be based on all your various pension sources. So, one of those sources is the state pension. Obviously most people in the call today, not all will have a Legal & General pension as well. I think it's fairly common that people have other pensions as well. And I think one thing that people can struggle with is having that visibility really of what their overall position might look like in retirement.
Okay. Well, bearing that in mind, what can our audience members do in order to try and find any of their other pensions?
Yeah. So, if anyone has lost contact with a pension, good news is that the government has a pension tracing service.
It’s a question we’re commonly asked when we go out and speak to our members, you just need to put in some basic information, and then the tracing service will help try and put you in contact with your pension. So that's a useful service if you're trying to trace your pension. The other thing to note is that a lot of our audience will have access to a service called My Future Now, which is something that Legal & General offer. Part of the My Future Now service is pension tracing. So again, you just provide a little bit of information and as part of that process they can help you make contact and find information about your pension basically.
Okay, great. And for any of our audience members who manage to locate other pensions or already have other pensions that they're aware of - before they think about transferring a pension, any of those into Legal & General, what are the sorts of things that they ought to be considering?
Yeah, I think the first thing I want to mention there really is it's important to always consider taking financial advice.
Legal & General would recommend that you do that. You don't want to move a pension if it's not in your best financial interest to do so. Of course, we can't make the recommendations today and we're not recommending that any particular course of action is right for our audience members.
The sort of things that advisers would typically look at, they're going to compare your various pension arrangements and also give some consideration to your personal circumstances as well. And the sort of things they might compare, so they look at the charges, so how much money is being deducted for running your pension scheme. They check if there are any penalties.
So, if you move your money from your existing provider to Legal & General or another provider, is there any reduction in value? They look at whether there are any valuable guarantees or any benefits that you've got in your existing arrangement that you don't want to lose and you would lose by virtue of transferring them into another arrangement. And actually, there are certain types of pensions where there would be a requirement for our audience members to seek financial advice, an example of that would be what's known as a defined benefit pension is sometimes referred to as a final salary pension.
If the transfer value was £30,000 or more, there is actually a requirement to go and seek financial advice from a regulated, authorised financial adviser, before they’d be able to transfer that type of arrangement. And really that's to protect people to make sure they're not doing something, they're not fully sure about, and they're losing things that they wouldn't want to lose.
If our audience don't have a financial adviser and don't know where they can find one Legal & General would commonly point them towards Unbiased.co.uk which is just where you can find a local financial adviser. I guess I should mention the advisers do usually charge for their services.
Okay. Thank you, Colin. And when it's deemed appropriate for a member to do so, what's the process for transferring a pension into Legal & General?
A great place to start really is what Charlotte mentioned, which is your online account. So, within your online account there's a link through to some further information about things to consider before you transfer pensions. And you can also request a transfer in pack so you can sort of physically ask for that to be sent out to you. If your scheme has the My Future Now pension tracing and consolidation service, you'll be able to see that as well within your online account. And if you follow that process, basically you need to give some basic details about your different pension arrangements, we’ll help you trace any that you've lost, as we've mentioned. And then it will summarize your various arrangements on an online dashboard and tell you about the sorts of things that you need to know really before you make a decision. The great news is that that service is free and you can still take financial advice if you want to. You're certainly not obligated to transfer if you decide you don't wish to proceed with it.
Also, I'm aware that Charlotte’s used that service personally. So, Charlotte, do you want to share your experience of using the My Future Now process?
Yes, sure. So, I use the My Future Now service and I used it from my online account firstly and I used it for a number of different things. So I have lost touch with some historic pensions that I held. I didn't know who the providers were and by putting my details into the My Future Now service, telling them who I worked for and what years I work there, they were able to identify the pensions that I held. So that was put for me into an online dashboard, which I then have the opportunity to review and it did highlight for me that I didn't know those pensions very well and in fact had some guarantees built in that I hadn't appreciated. And it did alert me to the fact that if I wanted to make a transfer, then I'd need to consider taking financial advice. So, for me it was really, really positive and easy experience.
Thank you both.
So, moving to our final topic, which is reviewing your savings to see if you're on track. Charlotte, what are the typical challenges that our audience members may face?
Well, I think to be honest, I think we are very busy dealing with today's financial issues and we often then don't have one eye on the future. And there can often be a disconnect between what you're saving for your retirement savings now, to what that may give you back later. So, I guess they are the key challenges is A. finding time and B. that not really understanding what you might get back. So hopefully some of what we say today will help with that.
Okay. In terms of what a member might get back from their pensions, is there anything that can help our audience find out what they might want or need from their retirement savings?
Well, the good news is, yes, there's lots of help and guidance and support out there. One of the things that our members can do is use our planning tool that will allow them to think about the cost of their life in retirement.
And that plugs itself into some really useful research that was conducted by the Pensions and Lifetime Savings Association, who did some research because it was found that 77% of people saving into a pension didn't know how much they'd need in their retirement. So the UK's retirement living standards were born as part of this research, helping people to really get to grips with what lifestyles in retirement might cost based at different levels and also what that might include. And they were labelled as a minimum lifestyle standard, a more moderate lifestyle standard, and more comfortable.
And to give a bit of a flavour of that in the minimum lifestyle standard for a single person wanting covering their basic needs with some money left over for fun. So including, for example, some eating out and a holiday in the UK that's just shy of £13,000 for a single person living outside of London. And for a couple that's just shy of £20,000. So, gives you an idea of how much that might cost. And I guess even better news is that for lots of us we will achieve that minimum lifestyle standard at least, due to the state pension that Colin mentioned earlier on that will provide us with quite a bit of that income. Perhaps we'll just be relying on our workplace pension to top it up. I guess in reality though, if we were all to sit and think about the future, we probably all agree that we'd want a little bit more than the minimum lifestyle standard. So, a really good idea to start thinking about what your own goals are and what that might cost you so you can identify if you're on track.
Okay, great. Thank you, Charlotte. And how can our audience members find out what they might be able to expect to receive from their Legal & General workplace pension?
So, we have a different tool that can allow our members to see what they're saving now and think about what that might give them in the future. So, if you like, it's a projection tool. Now, any projection tool will use assumptions and it's really important that when you are using the tool at home that you do read and understand all of the assumptions that have been used to calculate the figures that you're looking at and do be aware that it doesn't replace the need for you to take either financial advice, as Colin mentioned, or seek some guidance. But it's a brilliant way of helping with that disconnect between looking at how much you're paying in how many years you're going to save for, and then what that pension may look like in retirement.
And it goes kind of a step further. It will break it down for you into what particular way in which you might take that money might look like as a monetary value there’s some experimentation allowed for within the tool. So, for example, you might consider paying in more and it will allow you to look at what that might give you back if you have other pensions as Colin mentioned, you can add the value of those similar pensions, to the Legal & General scheme, so that if you like, you can look at the full picture. So, it really does quite a lot very quickly and easily just by going online to Manage Your Account.
Okay, great. Thank you. And if any of our audience members find that they're not on track and want to take some steps to do something about that, what are the options that are available to them?
So, when people are using the tool, they may find their retirement savings based on what they're currently saving are not going to be on track for the future, and that's something I’ve personally had some experience with. I've used the tools myself and due to quite a large period of working part time while bringing up a family, my contributions were less than they would have been if I'd been working full time. And that has led to me having a bit of a gap, if you like, between what I'd like in retirement and what I have. So I've had to consider whether or not it's possible for me to pay more, or, for example, could I work for longer so I could change the date that's been set for the scheme?
Thinking about if I could work for longer, in which case that might help me to plug the gap. I guess really important to say that if you do identify yourself that you'd like to save more into your pension, you will usually need to speak to your employer to be able to make that change to the contributions that you're paying into the pension, and your employer will then deduct those new changes to those contributions from your payroll and those will be passed across to Legal & General. So, lots of different options, but they're just some of the things that people might find.
Okay. Thank you. And that almost brings us to the end of our presentation today. I think we've covered quite a lot of ground. So, what I'd like to do is to ask each of our presenters what are the key takeaways that you would like our audience members to remember from this presentation today?
Charlotte, if I can start with you.
I guess I just remind everybody to have one eye on the future and it is easy to manage your retirement savings using the online tools that are available using our platform If you haven't done so already, then I would urge
people to get registered because that would allow you to quickly and easily access the details you need and to make sure that you are protecting your loved ones. So, if you haven't done so already, do nominate your beneficiaries and think about whether or not you can use the planning tools to identify if you as an individual need to make any changes.
Okay, great. Thank you. And Colin the same question to you.
A little bit similar to Charlotte, really. Just encourage our audience to take some control and to try and get some information really about what they're going to receive from their various pension arrangements.
So, the state pension, you can get a forecast from the government which will show you what you're projected to receive and when you’re projected to receive that and how you've built up credits towards that, as well.
As Charlotte's run through with us today, Manage Your Account is a great place to see what you might get, back from your Legal & General pension. But also to go that extra step, and that extra mile if you will and tackle all your pensions, which can be a challenge. We understand that if you've got lots of different pension arrangements and if you're really struggling with that and you don't feel comfortable doing that, you've always got the option of going and seeking some professional advice from an authorised regulated adviser. And, you know, just from speaking to people, myself and Charlotte often go out and meet our customers. We know some of the challenges that people face. But at Legal & General, we're here to help. So we absolutely encourage you to engage with us and to use the tools and resources that we offer and to help you take control. And if you do that, hopefully it will give you a better sense of the financial wellbeing which make you feel better today. But hopefully also it will give you a better tomorrow as well.
Great. Thank you both.
Well, that brings us to the end of today's presentation. I'd like to thank our audience for joining us today. We hope you found this presentation to be helpful and informative and we look forward to seeing you at another one of these sessions in the not too distant future. We welcome your feedback. There's a quick and easy to complete feedback form on the BrightTalk platform, so if you have a few moments to spare, please let us know what you thought of today's presentation and if there are any areas that you'd like us to think about covering in the future. And yes, that is pretty much everything from us today. So, thank you and good bye for now.