Retirement planning, collating information and managing costs are among the best ways for defined contribution (DC) members to optimise their retirement income according to WEALTH at Work.
The financial education provider has created a list of top ten considerations for retirement planning.
Director Jonathan Watts-Lay (pictured) said: "The freedoms people now have with their pensions is a good thing, but it can be incredibly daunting for many.
"Previously the main option was to purchase an annuity, and many people bought them from their pension provider even though there may have been better rates available elsewhere.
"Employees need to understand the many retirement income options they now have because of the pension freedoms, and to know that support is available to help them make the most of it," he added."
1) Make a basic retirement plan
Workers may want to build in some flexibility as it is almost certain that their plans and needs will change during their retirement with budget planners available online.
2) Collating up-to-date information on ALL their assets
This should be before employees make any decisions based on their retirement plan. Information includes how much they can expect from their company pensions and when they will pay out, and the value of other savings and what they are, ISAs or shares for example. The pension income and their savings are what they are going to use to replace their monthly pay.
3) Obtain a State Pension statement
Many people will not be eligible for the maximum amount of the new State Pension. It is important that employees check their State Pension record and National Insurance contribution history early if they have any gaps they may still be able to make up the difference. They can request a State Pension statement using a form called a BR19, which is available online or by calling the government helpline on 0345 3000 168.
4) Check what the pension options are
Pension wise, the free and impartial guidance on DC pensions can help for those age 50 and above. This includes insight into pension options, and their advantages and disadvantages.
5) What the pension scheme allows including annuity, drawdown or cash withdrawal
If employees transfer out of a workplace scheme to a better provider, they need to ask themselves if they are confident enough to go it alone, or if they would be better off contacting a financial adviser to discuss their options.
6) How long it will take to get access to a pension
Employees will need to understand that pension schemes don't operate like bank accounts, there's no instant access and it can take weeks to get payments through. Therefore, they need to know exactly how long it will take so they can plan for this.
7) Which options might be right for them and how can they be put in place
Guidance from Pension wise might be enough, but if they have more than just a small pension, perhaps some ISAs, other pensions, property, or if their partner has other assets, they might want to consider getting financial advice.
A financial adviser should look at all of their assets and work out the most tax efficient way for them to fund their retirement income, and put the plan into place.
8) Be clear about all costs involved
Employees overseeing pensions independently isn't free and there will be charges and commissions to pay. Advice can more than pay for itself, especially if it avoids making a costly mistake.
9) Be wary of scams
Scams look and sound legitimate. Check that the company is registered with the Financial Conduct Authority.
10) Take the time
Retirement is likely to last a long time, so employees should not make snap decisions or rush into anything they're not sure about.
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