People with a final retirement pension are encouraged to “prepare for retirement” as research indicates that a lack of awareness could mean that some will end up missing out on the income they are owed.
The Pension Protection Fund (PPF) said the results of its survey showed an acute lack of understanding and commitment among some pension plan members regarding their defined benefit (DB) pensions.
Defined benefit pensions, such as final salary plans, are often referred to as “gold plated” because they promise savers a certain level of income when they retire.
The PPF is financed by a levy on pension plans and provides compensation for pensions lost in the event of an employer’s bankruptcy. It protects nearly 10 million members belonging to more than 5,200 pension plans.
His research, based on a survey of 2,000 DB plan members, found that only 49% were concerned about the value of their pension plan.
However, a third (33%) feared they would not have enough to live on in retirement.
The PPF said savers might not be able to plan for retirement without specific information.
Meanwhile, more than a third of defined benefit pensioners were unsure whether they could exit their pension scheme.
The PPF said DB pensioners should receive financial advice if they are considering leaving their scheme and their benefit is worth more than £ 30,000. He said administrators can provide key insight into pension values, plan benefits and perhaps even changes to plan rules that can affect what members receive when they retire.
Almost half (48%) of defined benefit pensioners surveyed had never met with a financial advisor to discuss their retirement savings.
Research also found that three-quarters (75%) of DB retirement savings were unaware that their retirement was protected by the PPF in the event of their employer’s bankruptcy.
Sara Protheroe, Director of Client Services at PPF, said: “It is extremely worrying that so many people on a defined benefit pension are not aware of the valuable protection available to them in the event of their employer defaulting, which can lead to inappropriate pension benefit transfers …
“We already know that the nature of retirement is changing, that people are working and living longer, so it is very important that individuals make 2022 their year to prepare for retirement and take the time to understand how their pensions can. help them reach their retirement goals. “
Here are the tips from the PPF to prepare for retirement in 2022:
– 1. Engagement with your PD pension provider is essential. A good place to start is to check any correspondence you have received from your pension plan. Some plans offer an online service where you can check your benefits on their website.
– 2. Talking to a professional financial advisor is a good option to understand how your savings and your DB pension can work together to fund your retirement plans. Seek advice early as an advisor will help you decide if it’s the best option for you based on your savings and goals, and you’ll still have time to make changes if needed before you retire.
– 3. Any defined benefit pension you have had throughout your working career will be yours, whether or not you are currently working for that employer. If you have lost the correspondence of a previous pattern, you can explore more than one avenue. The Pensions Tracing Service is a free government service designed to help people who have lost track of their pensions. Second, if the employer who offered you your defined benefit pension is still in business, they should be able to help you get in touch with your pension plan. Or, if you know your old business has been taken over by another business, contact the new business’s HR team as they should be able to tell you who to contact regarding your retirement.
– 4. If you are still employed by the company where you receive your PD pension, your HR team is also a good place to start if you want to get more involved in your pension. They will be able to direct you as to how much your defined benefit pension might be worth, as well as share more information about your plan provider. You can also discuss with them the possibility of supplementing your pension through a scheme of voluntary supplementary contributions (AVC).