You’ve worked hard and saved into your pension. But what can you do if you realise you aren’t going to have enough money to pay for the retirement you want?
Firstly, don't panic. We've put together some information to help you take back control of your finances.
Track down all your pension funds
If you’ve moved jobs a lot, you may have pensions that you’ve forgotten about and lost contact with. Make sure that you track them all down and take them into account when planning your retirement finances.
The government's Pension Tracing Service can help you find both company and personal pension plans that belong to you. Even if forgotten pension funds are small, it all adds up.
To make life easier, you can transfer multiple pensions all into one place. Just make sure you consider the risks, charges, funds and valuable benefits that could be lost. You may be required to get financial advice for which you may be charged. Also the value of your pensions can down as well as up and you could get back less than has been paid in.
Delay your retirement
Staying in paid work longer can give you more time to add to your pension fund and may help you to address any small debts before you retire. If you’d still like some of the freedom that retirement offers but want to keep working, you could try to reduce your hours or look for a part-time job.
While delaying your retirement could mean you pay more money into your pension, it doesn’t guarantee you’ll get more money from it when you retire. As pension investments can go down in value as well as up, so you may get back less than you’ve invested.
All this means is that if you're thinking about delaying your retirement, it’s worth talking to a financial adviser, who may charge you for their services.
You may also need to find out the deferment rules for your pension scheme. Ask your employer or pension provider how this works and what it means for you.
Find out what you’re entitled to
You’ll probably be able to claim a State Pension if you’ve worked and made National Insurance contributions or received National Insurance credits. Not everyone gets the same amount, so it’s worth finding out what you’re due. And if you don’t take your State Pension straight away, you can increase the payments you receive when you do choose to start.
You normally need 35 years' National Insurance contributions or credits to qualify for the maximum pension under the single state pension rules, and you normally need at least 10 years' contributions or credits to receive any state pension. You can check what you're currently entitled to here.
There are other benefits you may be entitled to in retirement, which you can check on the Government website, such as pension credit and winter fuel payment. You can use a calculator from the Govement website to work out how much you might be able to claim.
Check how much guaranteed income your pension savings could buy
If you choose to buy an annuity with some or all of your pension savings, you’ll receive a fixed income for the rest of your life. Annuity rates don’t stay the same, but to get a picture of the income you might be able to get, you could use our pension annuity calculator. You don’t have to buy an annuity from your pension provider, so you can shop around to look for a better rate.
Review your savings and investments
Your pension isn’t the only place to look for the money that’s going to fund your retirement. If you’ve got any investments or savings, now’s the time to check on their performance and returns.
If you do some research, you may find that they could be working harder for you if you move them elsewhere. This could be a complex decision and you need to consider the charges, fund range and any valuable benefits that could be lost. We always recommend you talk to a financial adviser.
Release money from your home
There are different ways to unlock cash – or release equity – from some of the value of your home to help fund your retirement.
A popular type of equity release is a lifetime mortgage. It's a long-term loan secured against your home, which you can apply for when you're aged 55 and over, and there are no monthly repayments. Typically, the loan and any interest that's built up is repaid when you (and your partner, if you've taken it out jointly) pass away or need long-term care - normally using money from your home's sale.
You need to know that taking out any type of equity release will mean you can leave a lower amount behind to loved ones. It may also have a tax impact and affect whether you’re still eligible for welfare benefits.
It’s important to consider the benefits, costs and risks before deciding whether a lifetime mortgage or another equity release product is right for you. If you're thinking about equity release, you should always get financial advice.
It’s important to get financial advice when making decisions about your pension, so please speak to your financial adviser. If you don’t have one, we can help put you in touch with one. Call us on 0800 302 9656, Monday to Friday 8am-6pm^.
If you need more general advice tailored to your specific situation, Citizens Advice offer guidance on various topics, including debt. A number of charities can also help with money issues in retirement, such as Tax Help for Older People.