Calculating your total retirement income
HOW WILL YOUR PENSION STACK UP?
When planning your retirement, the first thing you should do is work out how much money you'll need to support your lifestyle. You have to work out your outgoings – not just today but as they’re likely to change over the years.
Next you'll need to calculate how much money you can expect to have coming in when you've retired. That includes the State pension, and interest from savings, and any income from private or company pension plans.
This is more difficult than it sounds so we recommend you discuss it with LV= adviser. They may think of things that might never occur to you.
HOW DO I FIND ALL MY PENSION DETAILS?
Over the years most of us have had more than one job and so we often acquire more than one pension plan. You need to find out how much income each of them is likely to provide.
Any pension scheme you have paid into ought to send you an annual forecast of your pension benefits. However you may have lost track of one or more of them. If this happens, the Pensions Tracing Service may be able to help by providing current contact details for the pension scheme. You can then contact the pension provider and find out what you are entitled to.
Around six months before you plan to retire you should check your State pension rights. Remember, you have to apply for it as it won’t start being paid automatically. Don’t worry, they should send you an invite to apply about four months before you reach State Pension age.
WHAT IF I’VE GOT MORE THAN ONE COMPANY PENSION?
If you do have more than one company pension, you need to find out what kind of annuity offer each of them will make to you. Don’t just ask what rate they are offering, but also whether they offer a guarantee period, a guaranteed value, and whether they are based on level or escalating values, or single life or joint life annuities.
This will not apply to final salary pension schemes as the amount of your pension is dependant on your salary when employed and your length of service.
If you've established that it is not a final salary pension scheme and you have the information detailed above, you should shop around. Use the open market option to see what other providers will offer. Then get the advice of an LV= annuities adviser to make sure you’re comparing like with like.
Once you have all of this information you could decide to take out separate annuities from each of the existing providers, or transfer one or all of them to a new pension provider.
Before you make this decision you’ll also need to find out whether there are any restrictions on the benefits that can be taken. For example whether any of your pension benefits contain protected rights.
Whether you do consolidate your pension plan or not depends on your personal circumstances, but your LV= annuities adviser will be able to guide you and, if you do decide to transfer your funds, will take care of all the paperwork.
HOW DO I GET MY STATE PENSION AND HOW MUCH IS IT?
The size of your State Pension depends on how many years of National Insurance contributions you have made. You can find out what you should receive at www.direct.gov.uk. You can also find out about the benefits of putting off taking your State Pension.
Remember you won’t receive it automatically. You have to apply for it. However, you should have received a State Pension Information Booklet and an invitation to apply at least four months before you reach retirement age.
If you haven’t received it three months before you reach State Pension age the quickest and simplest way to claim is to ring the State Pension claim line on 0800 731 7898.
If you have speech or hearing difficulties, you could also use the textphone service on 0800 731 7339. Alternatively you could download the State Pension claim form at www.direct.gov.uk then print it out, and send it to your local pension centre.
WHAT OTHER BENEFITS CAN I GET?
It is worth finding out if you’re entitled to any extra benefits, especially if you have a low income. For example you might be entitled to housing or council tax, disability, or carer benefits.
Many people on low incomes are entitled to Pension Credit. This comes in two parts: as a guarantee of minimum income and as a savings credit.
Pension Credit is designed to guarantee you receive at least the minimum amount of money that the government has decided is sufficient for pensioners to live on.
The second part rewards you for having saved for your retirement by paying an additional amount (up to a pre-set limit) on savings you may have made towards your retirement – the calculation is a bit complicated but your LV= annuities adviser will be explain these in more detail or you can find out all about them online at www.direct.gov.co.uk
SHOULD I USE MY SAVINGS?
When you’re planning for your retirement you should take all your assets into consideration. Again this is when an LV= adviser can be invaluable. Everyone’s financial situation is different and there are a lot of things to think about so an expert’s view is vital.
If you’re on a low income can you claim extra benefits? If you own your home can you release some equity to provide extra income? If you have substantial assets, or a number of sources of income, how can you reduce your tax commitments?
Remember, as well as your income from pension annuities, what you earn from savings and investments, and even your State Pension, are all taxable.
Your LV= adviser will be able to guide you to the best solutions for you.