Setting out on your pension journey

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Transcript
Setting out on your pension journey - presentation transcript
Slide 1. 'Setting out on your pension journey'
Welcome and introductions.
This session has been designed to help members who are setting out on their pension journey.
You may have recently joined - or be thinking of joining - your employer’s Legal & General workplace pension and want to find out more about the scheme. Or maybe you’ve been a member for a few years now and just want to know a bit more about how pension saving works.
Whatever stage you’re at, now is a good time to find out more about your pension, as the actions you take now, and in the years ahead, will have an impact on the amount of income you might receive when you’re older.
So, although it might seem like it’s a long way off, the decisions you make today are likely to play a vital role in shaping your future lifestyle.
Slide 2. Important information
Risk warnings:
- This is a general education presentation and does not represent financial advice.
- It’s based on the 2024/2025 tax year.
- The law, tax rates and any allowances may change in the future.
- The value of your investment will go up and down. It isn’t guaranteed, so you may get back less than you put in.
Whatever's going on in your world right now, it's important to remember that your workplace pension is a key part of planning for your financial future.
At Legal & General, we're in your corner and you can be sure that our fund managers are continuing to work with their teams of economists, strategists and analysts to expertly manage your pension savings. For more information, go to our ‘Manging your savings in uncertain times’ webpage.
Please note that we’re unable to answer market related questions or questions of a personal nature that are related to the current economic conditions. If you are looking for a recommendation you should consider taking financial advice.
Slide 3. Agenda: What are we going to cover today?
Today we’ll be looking at:
- what your future lifestyle might look like … and how much it might cost.
- the benefits of saving into a pension.
- whether you’re saving enough.
- how your gender or ethnicity could make it harder to achieve your retirement saving goals.
- the resources that can help.
- how your savings are invested.
- 3 things you can do straightaway to ensure you’re on track to achieve your retirement lifestyle.
Slide 4. What sort of future do you want?
Thinking about the future can be difficult, especially when it seems such a long way off!
Which can make working out how much you’re going to need to support your future lifestyle even more difficult.
Slide 5. What will my future lifestyle cost?
According to research carried out by the Pensions and Lifetime Savings Association (PLSA) only 23% of savers know how much they are likely to need in retirement.
To help pension savers visualise the cost of this for themselves, the PLSA created the Retirement Living Standards.
And, with that in mind, we’re going to play you a short video …
<play video> If you’d like more information visit retirementlivingstandards.org.uk, which you can access via the QR code on the slide.
You might be wondering why it’s so important to start picturing your future now, given that your retirement is so far away.
In simple terms, if you don’t know where you’re heading for, how are you going to get there?
Saving for retirement is a very long journey. So, not only is it important to know what you’re aiming for, but it’s also vital to keep checking your progress to work out if you’re on-track to reach your preferred destination.
The good news is, we’ve tried to make this as easy as possible, by providing you with tools that can help you to do just that.
We’ll look at these in more detail later in the presentation.
Slide 6. The benefits of saving into a pension
There are a number of benefits, when it comes to saving into a pension, and we’re going to take a look at a few of them now.
Slide 7. Your pension contributions
In most cases, when you pay into your workplace pension your employer will pay something in as well.
How much you pay will depend on the contribution structure for the scheme you’re in and is usually based on a percentage of your pensionable salary.
For some pension savers the structure will be based on the minimum amounts set by the government for Auto enrolment. However, it’s not unusual for schemes to adopt structures that are more generous than the minimum.
You can normally choose to pay more than the minimum amount and, should you choose to increase your contribution, your employer may also contribute more.
So, with this in mind, it’s a probably a good idea to familiarise yourself with the contribution rates for your scheme, which you’ll be able to do by contacting your HR/Payroll team or by going to your employer’s Benefits platform, if you have one.
The good news doesn’t stop there!
The government also rewards you for saving towards your retirement, by giving your contribution an additional boost in the form of tax relief. For more information on tax relief and how it works, see the ‘Tax relief on pension contributions’ section of the MoneyHelper website.
This money is then paid into your pension every month, helping to build the size of your pot over the longer term.
What’s more, if you make your contributions through salary sacrifice, you might even receive the National Insurance Contribution savings as a further top-up.
Slide 8. Are there any limits on how much I can save?
In case you’re wondering whether there is a limit on how much you can save into a pension each year and still receive tax relief, the answer is yes.
You can normally pay the equivalent of your annual UK salary into your company pension plan each year and still get tax relief. However, there is an Annual Allowance and if you go beyond this, you may incur a tax penalty.
In the current tax year, it has been set at £60,000.
This allowance applies across all schemes you belong to, and includes all contributions paid by you or anyone else on your behalf – including your employer.
And whilst not many people’s contributions will exceed this allowance it could also be useful to know if, for example, you receive a bonus at work and you want to pay some or all of it into your pension.
It’s also worth being aware that there are other circumstances that can restrict the amount of money you can contribute into a pension and still receive tax relief, including the Tapered Annual Allowance and the Money Purchase Annual Allowance.
All of these tax rates and allowances are subject to change. Legal & General’s Tax Year Rates and Allowances booklet has up to date information on these. If you want to find out more, detailed information is also available on the ‘Tax on your private pension contributions’ page of the HMRC website at Gov.uk, which you can access via the QR code on the slide.
Slide 9. Building your pension pot over time
As we’ve already seen, your contributions – including the contribution from your employer and any tax relief from the government – are paid into your pension pot.
These contributions are then invested, along with the rest of your pension pot, with the aim of protecting or increasing the value of your savings over the long term. Please note that this is not guaranteed and the value of your savings can go down in value as well.
Charges are deducted for managing the scheme and the investments.
You can take money from your pension in different ways, although the options available to you will depend on your scheme rules.
Currently, you can start to take money from your workplace pension from age 55 but this will increase to age 57 from 2028.
Slide 10. Are you saving enough?
According to recent research carried out by Legal & General, 18% of young people currently contributing to a workplace pension don’t know how much they are paying in each month.
It’s difficult to work out whether you’re saving enough if you’re not sure how much you’re actually paying in!
Fortunately, you can quickly and easily find out what you’re paying in by looking at one of your recent payslips.
As well as showing you how much you - and your employer - paid into your pension that month it will also show the total amount that has been paid in so far in the current tax year.
Slide 11. What about the State Pension?
Recent research suggests that 17% of 22 to 32 year-olds hope to retire at age 60.
Currently, however, the State Pension age is between 66 and 68, depending on when you were born, which means those savers will be facing a potential gap of 6 to 8 years between retiring and qualifying for their State Pension. Not only that but the State Pension, once you do qualify to receive it, is unlikely to support more than a basic lifestyle in retirement.
Let’s take a look at how it works.
For the 2024/2025 tax year, the full State Pension is £221.20 per week or approximately £11,500 per year.
To receive a full State Pension, you need 35 years’ qualifying National Insurance (NI) contributions. You must have at least 10 qualifying years of NI contributions to receive any State Pension entitlement.
As well as paying contributions while working, you can also ‘earn’ qualifying years by receiving NI credits if you’re unemployed, ill, parenting or a carer.
As we saw in the PLSA video earlier, even if you qualify for the full State Pension, this will be less than the amount required to support the PLSA’s Minimum lifestyle in retirement (the video we watched at the start of the presentation). And it will fall some way short of the amounts required to support a Moderate or Comfortable lifestyle in retirement.
Slide 12. Will your savings be enough?
Legal & General’s ‘Lost Decade’ research has highlighted some startling truths, when it comes to young adults saving towards their retirement.
UK adults aged 22 to 32 years old could see an income shortfall of more than £25,000 a year in retirement if they continue saving at current levels.
Zoomers (people born in the late 1990’s early 2000’s) and young Millennials (people born between 1990 to 1995) are forecast to have an average of around £800,000 in their retirement pot, which would provide you with an income of approximately £52,000 a year if you had retired last year.
However, because you might not be taking this income for another 30 or more years, inflation – or the rising cost of goods and services during that time - means that this would be worth less than £16,000 - in real terms - by the 2060s. Leaving retirees with a shortfall of more than £26,000 a year.
It’s also worth highlighting, before we move on to the next slide, that £800,000 is an average forecast and, as such, may not reflect the amount that you might have in your own pot, when you’re ready to start using it.
Did you know?
If you can pay in just a little bit more, a small amount each month can have a big impact on what you might receive when you’re ready to put your feet up and start to take things a little easier.
As the example shows, a 22 to 32 year old paying an extra £30 each month could boost the value of their pension pot, when they’re ready to start taking it, by £100,000.
Slide 13. How much should I be saving?
There isn’t a ‘one size fits all’ answer to this question.
Ideally, you should contribute as much as you can sensibly afford to pay, in line with the income you’ll need to support your plans for later life. And, in case you haven’t done so already, don’t forget that we have a range of planning tools that can help you to work out how much you might need to support your future lifestyle.
Things to do:
- Review what you’re currently paying in
- this will help you to work out where you are and what you need to do.
- Set up an annual review in your calendar
- having a regular review will help to keep your plans on track.
- Increase the amount you’re paying in
- look for savings in other areas that could help.
- consider paying in some or all of any annual bonus or pay increase you receive.
- even small amounts can make a real difference over time.
- your employer may increase what they pay if you contribute more.
Our retirement planning tool can help you to see if you’re on track to have the income you’re looking for at retirement. You can also use it on a regular basis to check whether you’re on track to achieve your goals.
We’ll look at this tool in a more detail later in the presentation.
Slide 14. Mind the gap!
You may not realise it but, when it comes to building up your pension pot, your gender or ethnicity could make it harder to achieve your retirement goals.
Known as the ‘Gender Pension Gap’ and the ‘Ethnicity Pension Gap’, we’re going to take a look at both of these in more detail before highlighting some of the actions that members, who may be concerned that they may be impacted by one or both of these, can take.
Slide 15. Mind the gap!
Starting with the 'Gender Pension Gap'.
Research carried out by Legal & General has identified that, if you’re a woman:
- The average value of your pension pot, when you start working, could be 16% less than that of a male counterpart.
- By the time you reach retirement, the difference could be as much as 56%.
- The ‘Gender Pension Gap’ exists because women are generally:
- paid less.
- less likely to be in senior leadership positions, resulting in lower pay and lower pension contributions.
- more likely to take career breaks for childcare or as an unpaid carer.
- more likely to work part time or reduced hours.
- less confident when it comes to savings and investments.
Divorce can also have an impact and retiring early due to the symptoms of the menopause.
The 'Ethnicity Pensions Gap' means that your pension pot at retirement is likely to be less than half that of the average of white British counterparts.
There are lots of reasons to explain why this gap exists and there is some overlap with some of the reasons that lead to the Gender Pension Gap, such as low pay, a lack of access to senior leadership positions and taking time out or working part-time to fulfil caring responsibilities or to take maternity leave.
If you think you might be affected by either of these gaps, here are 5 things that you can do to close them for yourself.
1. Try to contribute as much as you can into your pension - and start early.
2. Make the most of your workplace pension. Find out more about the contribution structure and any additional contributions your employer might make if you pay more in. And remember that the more you pay in, the more you’ll get added by the government in tax relief.
3. If you’re able to, try to maintain your contributions when taking time out to look after children or care for others.
4. Review your savings at regular intervals to make sure you stay on track, particularly if your circumstances change, to avoid falling into one of these potential gaps.
5. Talk to your partner about your retirement savings, to ensure you’re on the same page and that your retirement plans are in sync.
We would also suggest making use of the support and guidance that’s available on the MoneyHelper or Retirement Living Standards websites.
Slide 16. Resources that can help
We want to help you take control of your future and get your pension journey off to the best start possible.
To help you with this, we provide a range of useful tools and resources.
Slide 17. Managing your pension
You can manage your retirement savings with Legal & General using your online account.
It’s a bit like ‘internet banking’ for your pension. In the same way most of us manage our bank accounts online these days, your online account gives you access to manage your pension savings. You can access your online account at legalandgeneral.com/mya.
Some of you may also be able to access it from your company’s intranet site or workplace benefits platform - without needing to enter a password, if your employer operates a single sign on process.
You can also login to - or register to access - your online account by scanning the QR code on the slide.
Once logged in to your account, you’ll be able to
- see the current value of your pension pot.
- use our planning tools to regularly check what your pension pot might be worth at retirement and to work out if you might want to increase your contributions or change your retirement date.
- provide details of who you’d like your pension benefits to go to in the event of your death (nomination of beneficiary).
- see how your savings are invested, look at the other investment choices available to you and, should you wish to, change the way you’re invested.
- view your benefit statements.
- change your selected retirement date if it no longer reflects your plans.
Slide 18. The Legal & General App
The Legal & General App gives you everything you need to manage your workplace pension in the palm of your hand!
With complete access to your online account, you can carry out all of the tasks we highlighted on the previous slide from your tablet or mobile phone.
If you’ve already registered for your online account, you can log in using the same username and password. If you haven’t already downloaded it, you can do so from the App Store or Google Play.
Slide 19. Our retirement planning tool
The retirement planning tool in your online account can help you to see if your pension savings are on track to provide you with the lifestyle you’d like to have in retirement.
And, if it doesn’t look like your savings will provide you with the money you need to support the lifestyle you want to have, you can use the tool to experiment and look at the impact that increasing your contributions or working for longer might have on the value of your savings at retirement.
As we saw earlier, over the course of your working life, even a relatively small increase in the amount you contribute each month, can really make a significant difference to the value of your pension pot when you’re ready to start using it.
Even if you’re just starting out on your pension journey, it’s a good idea to use the tool on a regular basis - at least once a year - to monitor if your savings are on track to meet your needs.
There are several risk warnings and assumptions and it’s important that you read and understand them. It’s also important to be aware that using the tool does not replace the need for you to seek guidance and financial advice.
Slide 20. A little bit richer
Our Go&Live website offers information and support on a wide range of topics from retirement planning to looking after your mental wellbeing.
You’ll also be able to access our ‘little bit richer’ podcasts, in which host Kia Commodore is joined by a special guest to demystify the muddy world of money management. Complete with top tips on everything from ISAs and student loans to mortgages, budgeting and even your mental health. You can access our Go&Live website by scanning the QR code on the slide.
Slide 21. Investing your savings
We’re going to take a little time to look at some of the things to consider, when it comes to investing your pension savings. Please note, that the purpose of today’s session is to provide you with an understanding of the basics.
If you’re interested to learn more about how your savings are invested, following today’s presentation, you’ll find more information on your scheme website.
Please note that, before making any changes to the way your savings are invested, you should consider speaking to a financial adviser. You can find one in your local area at unbiased.co.uk. Financial advisers usually charge for their services.
Slide 22. How are your savings invested?
Your scheme has a default investment option.
Depending on the scheme you are in, this will be a fund or lifestyle profile, and it is where your retirement savings will be automatically invested if you don’t make a different choice.
It will have been selected by your employer and/or your scheme Trustees, possibly in conjunction with their investment advisers.
Although it’s considered a suitable choice for most scheme members, the default investment option doesn’t take into account your personal circumstances or your future plans. You don’t have to remain in the default and, instead, you can choose to self-select your own investments from the options available to members of your scheme. And, although this may not necessarily be important to you at this stage in your pension journey, some of the choices available will also allow you to invest in a way that suits your plans in retirement.
If you’re thinking of making your own investment decisions, you can find details of all the investment options that are available to you on your scheme website or by visiting your online account, where you will also be able to make any changes. It’s also important to check whether the fund or lifestyle profile you’re considering matches your own attitude to investment risk and your plans in retirement.
Please be aware that the value of an investment and any income taken from it is not guaranteed and can go down as well as up, and you may not get back the amount you originally invested. Different funds have different associated risks. Please read the relevant fund documentation before making any investment decisions.
And, as we mentioned on the previous slide, you may want to take financial advice before making any changes to your investments. You can find a local financial adviser at unbiased.co.uk, which you can access by scanning the QR code on the slide. Financial advisers usually charge for their service.
Slide 23. Understanding risk and reward
When it comes to investing your money, there is a relationship between investment performance and investment risk.
This means that, if you choose a high-risk fund that might have the potential to perform better than other investments, there’s likely to be a greater chance that you could lose a large part – and in some cases all – of the money you have invested.
By investing in a low-risk fund, you’re unlikely to lose your savings but they’re unlikely to go up in value by as much.
You can reduce risk by putting your money in different types of investment with varying levels of risk. This is commonly referred to as 'diversification'.
It’s important to be aware that, in periods of extreme market shock, some asset classes can be more volatile and, as a result, the chance of you losing some or all of your money could be greater.
When you put your money into your pension, it’s invested into one or more funds with the aim of helping your savings grow. Funds can be made up of a range of assets - assets can commonly include equities (company shares), property, bonds (loans to businesses and government) and cash (short-term deposits with governments and financial institutions such as banks and building societies).
In most cases, your scheme’s default investment option will automatically diversify the way your savings are invested.
For more information on this, or to find out more about risk and reward and how Legal & General risk rates its funds, see your scheme website.
Slide 24. Environmental, Social & Governance (ESG) Hub
Responsible investing involves considering environmental, social and governance (known as ESG) issues when making investment decisions and seeking to drive positive change in the companies and assets invested in. You can find out more about ESG and how it relates to pensions on the Legal & General Workplace ESG Hub. Our responsible investing overview also provides more details on the different funds and responsible investing approaches that may be available to you.
Many of us care deeply about issues that affect the environment, the fair treatment of people and the way organisations are run.
Every year, shareholders in companies get to ask questions and vote at board meetings on issues like solving climate change and protecting workers' rights.
Now, through your pension and the investment in companies that your pension makes, you can have a say on issues you think companies should focus on and use the power of your pension savings to influence how those companies respond.
We’ve partnered with Tumelo to give you a platform to voice your opinion on topics you think companies should focus on.
With Tumelo you can:
- see which companies your retirement savings are invested in.
- have a say on issues you care about.
- make sure your voice is heard on environmental, social and governance matters.
- drive real positive change.
- use your voice and the power of your pension to influence large companies.
If it’s available to members of your scheme, you’ll be able to access Tumelo via your online account.
Slide 25. Summary
Most of our audience today will be just starting out on – or in the early stages of – their pension journey.
We’ve covered a lot of ground in this webinar and, hopefully, it’s helped you to get a better understanding of the benefits of saving into a pension, how pension saving works and provided some useful suggestions in terms of the things you can start doing now to improve your prospects of achieving the lifestyle you want in retirement.
You may have already identified some of the things that you need to do following this presentation but, if you’re wondering where to start, we’d suggest you focus on the following 3 things:
1. Use our digital tool to quickly and easily check if your savings goals are on track.
The retirement planning tool in your online account can help you to see whether the lifestyle you want in retirement is achievable based on where you are now. You can also experiment with it and see what difference a change in contributions or a different retirement date might mean.
2. Check if you’re making the most of the contributions available from your employer.
Remember, it’s a long road but the more you are able to save and the earlier you start your journey the more chance you have of getting there. And, the more you pay in, the more you’ll get added in tax relief and, depending on the contribution structure for your scheme, the more your employer might contribute as well.
3. Regularly review your pension pot, as your life changes, to make sure your plans remain on track.
Because you’re saving for the long term, it’s important to regularly check your progress, particularly if your circumstances change. Our online account makes it easy for you to do this. As well as checking how much is in your pot or using the retirement planner to look at different scenarios, you can also carry out lots of different admin tasks, such as updating your nomination of beneficiary information.
Slide 26. Thank you.
Thank you for attending today’s presentation. We hope you found it useful.
If there’s anything you wanted to know about that we didn’t cover today, please take a look at our Pension questions website, where you’ll find answers to some of the questions we get asked most often in presentations such as this one. Go to ‘legalandgeneral.com/pensionquestions’ or scan the QR code on the slide.
If you have a specific query about your individual workplace savings plan, you can contact our Helpline on 0345 070 8686 between the hours of 8.30am and 7pm Monday to Friday.
Please note that call charges will vary. We may record and monitor calls.
You will also find more information about your workplace pension by visiting your scheme website or by going to your online account, which you can also access by scanning the QR code.
We’d be keen to get your feedback on today’s presentation, so that we can continue to improve these sessions going forward. If you’re happy to provide us with some comments, there a feedback form on the BrightTalk platform that is quick and easy to complete.
We hope to see you at one of our events in the future.
Bye for now.
<ENDS>
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