Understanding your pension webinar
Understanding your pension presentation transcript
Welcome and introductions.
Housekeeping for the webinar and raise awareness of FAQs Campaign Page at legalandgeneral.com/pensionquestions
- This is a general education presentation and does not represent financial advice
- It’s based on the 2022/2023 tax year
- The value of your investment will go up and down. It isn’t guaranteed, so you may get back less than you put in.
- The law, tax rates and any allowances may change in the future
Given all the recent economic and political uncertainty, we’ve created a dedicated ‘Managing your savings in uncertain times’ webpage, where you can find out more information about what this might mean for your retirement savings, which you can access using the QR code.
Agenda: What are we going to cover today?
This session will:
- provide an overview of how pensions work
- explain our tools and resources so you can plan for your future
- cover what to think about if you want to get all your savings in one place and how to do it
- look at some of the questions that members ask most often
- point you towards various sources of helpful guidance and advice.
How pensions work
We’re going to start by looking at how pensions work and will begin by explaining the basics when it comes to the State Pension.
How much State Pension will you get?
For the 2022/2023 tax year, the State Pension is £185.15 per week.
You can start to claim between 66-68 depending on when you were born but this may change in the future.
To receive a full State Pension, you need 35 years’ qualifying National Insurance (NI) contributions and must have at least 10 qualifying years of NI contributions to receive any State Pension entitlement.
You can also 'earn' qualifying years by receiving NI credits whilst being unemployed, ill, a parent or a carer.
You can check your State Pension forecast. Go to the gov.uk website to see what you will receive and when.
The QR code will take you directly to the gov.uk website if you want to scan it with your mobile phone.
Your Legal & General pension
Your pension with Legal & General is what is known as a defined contribution pension, here’s how it works:
- Money is usually paid in by the employer and employee. In addition, a tax saving will also be made. Some methods of contribution also allow for additional savings on NI
- This money is invested and is subject to investment performance.
- Charges are deducted for managing the scheme and the investments.
- You can access your savings from age 55 (increasing to age 57 from 2028 in line with government regulations) in different ways, which we’ll look at in more detail shortly.
Tax limits on pension savings
If you’re thinking of changing the amount you contribute, you should bear in mind that there is a limit on how much you can pay before incurring a tax charge.
You can potentially pay in the equivalent of your entire annual salary each year (or up to £3,600 if you earn less than that) and get tax relief on your contributions. However, you should be aware of the Annual Allowance.
This amount has been set by the government at £40,000 for the 2022/23 tax year and includes any money that you or an employer pays in on your behalf, to this or any other pension plans you may have. If these contributions exceed the Annual Allowance in the current tax year, you may have to pay tax on the excess amount. If you earn more than £200,000 a year, your annual allowance could be reduced to as little as £4,000 a year. This is known as the Tapered Annual Allowance.
If you’ve already started taking your retirement savings, your annual allowance could also be reduced down to £4,000 a year. This is called the Money Purchase Annual Allowance.
There’s also a limit on how much you can build up in your pension pot over your lifetime before triggering an additional tax charge. Known as the Lifetime Allowance, for most people this is currently £1,073,100. If you exceed this amount, you could be taxed up to 55% on the excess when you come to take your benefits.
These allowances may change. Our Tax Year Rates and Allowances booklet, which you will find on your scheme website, will keep you up to date on any changes. More detailed information on these allowances is also available on the HMRC website at Gov.uk, which you can access via the QR code.
If you need help with tax and your pension savings, you may want to seek personalised financial advice. To find an adviser in your local area go to unbiased.co.uk. Advisers normally charge for their services. You can also find out more about choosing a financial adviser on the MoneyHelper website. You can access both of these websites via the QR codes.
Picture your future
More of us are saving in a workplace pension than ever before. We now have more information, more choice and more responsibility for our retirement savings.
But will the future we want be the future we’re able to achieve? Research carried out by the Pensions and Lifetime Savings Association (PLSA) shows that 77% of savers don’t know how much they’ll need in retirement.
The PLSA have created the Retirement Living Standards, based on independent research by Loughborough University, to help savers picture the kind of lifestyle they could have in retirement.
The standards show what life in retirement looks like at three different levels - minimum, moderate and comfortable - and what a range of common goods and services, including household bills and maintenance, food & drink and transport, might cost at each level.
Please note that the figures shown on the slide are based on people living outside of London.
For more information visit retirementlivingstandards.org.uk which you can access by scanning the QR code.
Our retirement living standards tool can help you identify how much money you’ll need based on the lifestyle you want. You can find it in your online account.
Don’t forget, when working out what your income in retirement might be, to include all the possible sources, including any other workplace pensions, private pensions and the State Pension, as well as any part-time earnings or other savings or investments you intend to use to supplement your income in retirement.
Understanding risk and reward
Generally, if you want the potential for better returns, you’ll normally have to accept more risk.
- In return for the possibility that the value of your savings could go up by more over the long term, there will usually be a greater chance that your savings could go down by more over the same period.
- This means that, if you chose a high-risk fund, you could lose a large part – and in some cases all – of the money you’ve invested.
- By investing in a low-risk fund, you’re less likely to lose your savings but they’re unlikely to go up in value by as much as they might in a higher-risk fund, when markets are performing well.
- You can’t get rid of risk completely, so it’s important to manage it carefully. You can diversify risk by putting your money in different types of investment with varying levels of risk, for example, cash, bonds (also called fixed interest securities), property and company shares (also called equities).
- It’s important to remember that a pension is a long-term savings product, and there will be times when all or most investment types will fall in value, particularly in times of global uncertainty or crisis.
There are four main types of assets that funds invest in. Your pension fund could invest in just one of these asset classes or a mixture.
You’ll find more information about investment risk in our ‘Guide to risk and reward’ and about managing your money in uncertain times on our website, both of which can be accessed by scanning the QR codes.
How are your savings invested?
Your scheme has a default investment option. This is a fund or lifestyle profile, into which your retirement savings will be invested if you don’t make a different choice. Depending on the scheme you are in it will have been selected by your employer or the scheme trustees, possibly in conjunction with their 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.
If you want to make your own investment decisions, you can find details of all the investment options that are available to you on your scheme website and or by visiting your online account, where you will also be able to make any changes.
If you’re thinking of making your own investment decisions, you should check whether the fund or lifestyle profile you’re considering matches your own attitude to investment risk and your plans in retirement.
You can also select investments that reflect the way you intend to take your money.
As you may already be aware, some of the investment options available will move your savings into other funds as you approach your scheme retirement age, but others won’t. It’s important, therefore, to review where your savings are currently invested and whether this is in line with your plans.
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.
You may also want to take financial advice before making any changes to your investments. You can find a local financial adviser at www.unbiased.co.uk. Financial advisers usually charge for their service.
Managing your pension
You can manage your retirement savings with Legal & General using your online account at Manage Your Account.
You may also be able to access Manage your Account via single sign on without the need to enter a password.
You can also access your online account by scanning the QR code.
Once logged in to your account, you’ll be able to
- see the value of your pension pot
- access our planning tools
- 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
Taking money from your pension
As a member of a workplace pension, you have the flexibility to choose how you take your money at retirement.
We’re going to play a short video that looks at the options available to you, which you can also access via the QR code
At Retirement video
VO 1: You’ve worked hard and have put some of the money you’ve earned into your retirement savings – now is the time to make decisions to enable you to enjoy the next chapter of your life. You’re ready to think about taking your money, so it’s time for a reality check to make sure your savings will provide the lifestyle you’ve planned for. You need to start thinking about the options available to you at retirement. As you approach retirement, you should start to think about how you want to retire and when. Perhaps you want to save more, or perhaps you want to access your savings later, it’s up to you. With most schemes you have the flexibility to choose your retirement age, you can increase this age throughout your journey if you feel your savings aren’t on track – remember your selected retirement age must be 55 or over. When you are approaching retirement or your selected retirement age, you should be starting to think about the different ways you can take your money, and how these fit with your plans. You can start to develop your own personal targets based on your individual circumstances and aspirations. You should start to think about what kind of lifestyle you could have in retirement depending on your salary, household, and retirement savings.
VO 2: So, like our state pensions, will we receive our money every month?
VO 1: Yes, that is one way but there is more flexibility than a state pension when accessing your retirement savings from your workplace pension, there are four main options for taking your money, you can:
- Take a flexible income (Flexi-Access Drawdown allows you to select some or all of your pension pot and take a maximum of 25% of the amount as a tax-free cash sum, while the remainder stays invested).
- Take it all in one go.
- Take it in a series of cash lump sums.
- Get a guaranteed income.
You could choose more than one option and you should also shop around to find the best provider for your needs. Be aware some of our schemes do not offer all of these options – please read your member booklet (usually found in the ‘document library’ of your scheme website) for more details.
VO 2: Will the savings in our pension pot be taxed?
VO 1: Yes, you can usually take 25% of your pot tax free but the remainder could be subject to income tax. These options and tax implications are explained in the ‘your options for taking your money’ section of your scheme website. You can also visit Money Helper here www.moneyhelper.org.uk.
VO 2: Say I needed access to some of my retirement savings for an emergency purchase or to pay bills (but do not formally want to retire) can I still pay into my pension after?
VO 1: Yes, you can access your pot after the age of 55 (or earlier if due to ill health) but be aware of the money purchase annual allowance (MPAA). This limits how much that you can continue to pay into a pension. Once you access your pot it will reduce the amount that can be paid in on a tax-free basis each year. You can get all the latest pension limits at moneyhelper.org.uk.
VO2: How is the MPAA triggered?
VO1: Generally, once you start to take an income from a defined contribution pension in the form of a taxable lump sum or if you take flexible income after you’ve taken the 25% tax free cash excluding small pension pots. Also, some people will have to consider that there is a limit to the amount you can build up in all of your pension pots over your lifetime without incurring extra tax This is known as the Lifetime Allowance. These are important decisions, so start thinking now. Get ready for retirement, review your options, and make a plan that’s right for you. If you are less than 10 years away from retiring and want more information to help you, go to the retirement section of your scheme website. For help understanding the choices available to you, visit Pension Wise, a government service from Money Helper that offers free, impartial guidance about your defined contribution pension options. You can book an appointment once you are aged 50 or over. We also recommend taking financial advice, visit unbiased.co.uk to find a financial adviser (be aware they usually charge for their services)
Our retirement planning tool
Our retirement planning tool can help you to see if your retirement savings are on track.
You can access this tool from your scheme microsite or by going into your online account.
However, if you access it via your online account, the tool will do some of the work for you by automatically populating some of the fields, including the value of your savings, the amount you contribute, and where your savings are invested.
You can select from a choice of different ‘Retirement living standards’ to help you identify how much money you might need to support a particular lifestyle in retirement. You can also use the tool to see how saving different amounts over different periods of time might impact the size of your pension pot.
You can also add the value of your savings in any other Defined Contribution (DC) plans.
This will help you to consider further which retirement income option might be right for you.
We recommend you use the tool at least once a year to monitor if your savings are on track to meet your needs.
The tool has a number of risk warnings and assumptions and it’s important that 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.
Our financial wellbeing hub, Go&Live, offers information and support on a wide range of topics from retirement planning to looking after your mental wellbeing. You can access our award-winning ‘Rewirement’ podcasts. Hosted by Angelica Bell, these podcasts bring experts and retirement savers together to share their experiences and discuss a wide range of pension-saving topics.
You can access these podcasts in the ‘quick reads’ section of our Go&Live hub, by scanning the QR code.
If it’s available to members of your scheme, you’ll also be able to access our free telephone-based Care Concierge service, which can help you to identify the options available and the things to be aware of when it comes to arranging care for yourself or a family member.
If this service is available to your scheme, you can find out more by calling free on 0808 189 3195 or by going to our dedicated webpage, which you can also access by scanning the QR code.
Take stock of all your pensions
You might have other pensions, including personal pensions and pensions from other employers.
If you do nothing else, it’s a good idea to let any previous pension providers know if you have – or are about to – change address.
£19.4 billion of retirement savings remain unclaimed because people moved house and didn’t inform their previous provider!
There are lots of reasons why you might want to transfer an old pension to a different provider. You may want to make it easier to manage your retirement savings (by having them all in one place) but it could also be about reducing your charges or improving your investment choices or the options that are available when you want to take your money.
When it comes to deciding whether transferring your retirement savings is right for you, there’s a lot to think about.
You might want to start by comparing the charges and available options, to see whether a transfer would be beneficial. You should also check if there are any penalties for transferring out or whether you would lose any guarantees or special features.
You should also find out if you’re required to seek financial advice, as some schemes (depending on the value of your pot) may require you get a recommendation from a financial adviser. And, even if you aren’t required to do so, you may still want to seek financial advice.
To find an adviser in your local area go to unbiased.co.uk, which you can access by scanning the QR code. Advisers normally charge for their services.
Please note, as we outlined at the outset, we’re only providing information in our presentation today. We aren’t able to provide financial advice and, as such, we aren’t recommending that a transfer is the right thing for you.
You can request a transfer pack or access our pension tracing and consolidation service, My Future Now, in your online account by scanning the QR code.
Frequently asked questions
What will happen to my pension in the event of my death?
Should you die before taking any benefits, the value of your pension pot will be paid to your beneficiaries.
The decision as to who will receive any money, will be at the discretion of Legal and General or your scheme’s trustees, depending on the type of scheme you are in.
You can, however, let us know who you would want your beneficiaries to be, and you can do this by completing the Nominate a beneficiary section in your online account.
It’s important to keep this information up to date if your circumstances change.
What will happen if I move abroad?
Should you decide to live outside the UK, you can choose to transfer your savings to a Qualifying Recognised Overseas Pension Scheme (QROPS).
You can find out more about this type of scheme and the things you need to consider at gov.uk.
If you’re thinking of drawing a pension from the UK while living abroad, it’s important to be aware of the tax implications. You can find out more on the MoneyHelper website.
What will happen if I leave my employer?
Even if you no longer work for your current employer, you can leave your retirement savings in this scheme invested with Legal & General and, depending on your scheme, continue to pay in. Charges for administering your plan and managing your investments will still apply.
Alternatively, you can transfer your savings to your new employer’s pension scheme or to another scheme of your choice.
Once your employer has paid the final pension contribution into your plan, we’ll send you a pack that explains your options in more detail.
The importance of seeking guidance and advice
It’s important to get the support you need to help you make decisions about your retirement plans.
Money Helper is the new name for the government body that brings together Pension Wise, The Money Advice Service and the Pensions Advisory Service.
The MoneyHelper website has information about the costs and what you should expect if you decide to pay for financial advice. It’s a good place to start.
Pension Wise is a free and impartial service that can help you to understand the ways you can take your retirement savings and the potential tax implications of each one. Their website offers lots of information and, if you’re aged 50 or over, you can book a free 60-minute appointment with a specialist who’ll provide you with guidance either face to face or over the phone.
The government also has a mid-life MOT website that provides guidance to help people carry out a financial stock-take some years before their retirement.
If you need personalised financial advice, visit unbiased.co.uk to find financial adviser in your local area. Please note that advisers normally charge for their services.
You can access these websites by scanning the QR codes on the screen.
LGFA: Legal & General Financial Advice
You may also have access to Legal & General Financial Advice (LGFA) through your Legal & General workplace pension.
If you’re resident in the UK, have a Legal & General workplace pension with a pension pot of £20,000 or more, and are aged 45 or over, our financial advisers can help you understand:
- the type of pensions you’ve paid into, including the State Pension, as well as any other Defined Contribution (DC) or Defined Benefit (DB) pensions
- which allowances you can take advantage of
- the tax implications for accessing your pension
- the ways you can access your savings
- how to invest your savings in a way that reflects your plans
We may also be able to help if you have more than £10,000 in your pension pot and are considering taking your benefits early due to ill health.
To find out more about the service and related costs go to the Legal & General Financial Advice website, which you can access by scanning the QR code.
Helping you take the next step
To help you with your retirement planning, we’ve created 2 Open University courses, both of which are free and take around 4 hours to complete.
The Midlife MOT is aimed at people in their 40s and 50s who want some help when it comes focusing on their own financial and physical wellbeing.
Completing this course will help you to assess your financial situation, understand how you can improve it and identify how much income you’ll need in retirement. It will also help you to look at your work life and assess your wellbeing.
Retirement planning made easy sets out the stepping stones to a more financially secure retirement.
Completing this course should provide you with a better understanding of your finances in retirement, the different ways you can take an income from your retirement savings and the impact that lifetime events can have on your retirement finances. You can access both of these courses via your scheme website or by scanning the QR codes.
Thank you for attending today’s session. We hope you found it helpful.
If you have any questions that are specific to your own Legal & General workplace pension, please call the Legal & General helpline on 0345 070 8686.
For any general questions about pensions, we’ve set up a dedicated page, which you can find at legalandgeneral.com/pensionquestions. It can also be accessed directly via the QR code.
It contains answers to frequently asked questions, links to various tools, resources and sources of guidance and advice. We’ve also added a new section with links to some of the resources we’ve looked at today that can help to support your financial wellbeing.
You can also access your online account by going to Manage Your Account at legalandgeneral.com/mya or by scanning the QR code.
So, it just remains for us to thank everyone for attending our event today. We hope you have found it useful and hope to see you at a future event. Feedback can be provided directly via the BrightTALK system. Any comments will help us improve future events.