PENSIONS WARNING
Martin Lewis issues urgent pensions warning for millions of workers who could be missing out on £1,000s a year
PENSION savers have been warned by Martin Lewis to check their provider has set the right retirement age or they risk losing thousands.
On ITV's Good Morning Britain today, the founder said millions of people could have the wrong retirement age on their workplace pensions.
3
He said: "Go to your scheme and check what your retirement age is, and if it’s wrong, change it. It's as simple as that.
"Millions could be affected and could potentially lose out on thousands of pounds because they have the wrong retirement age."
Martin explains the issue is that those with what's known as a defined contribution (DC) pension scheme - where both you and your employer contribute cash - often have a default pension that de-risks as you get closer to your retirement age.
This means your pension provider starts reducing your exposure to the stock market, so that when you come to retirement, your money isn't going to dramatically dip if your investments crash.
How can I check my retirement age?
IF your pension is something that is on your mind, then you might be wondering what age your workplace policy has you down for.
Aviva says this can massively impact your windfall once you enter your golden years.
We spoke to the Money and Pensions Service about how you can make sure you don't miss out.
You can check with your provider online or over the phone regarding what age it has you down as.
You'll also need to make sure any other personal details, including your address and marital status is kept up to date.
For advice, you can contact for free online or on 0800 011 3797.
Jackie Spencer, pensions expert at the Money and Pensions Service said: “It’s important to keep your pension provider up to date with major life changes.
"If you’re unsure where to start with your pension we’re here to help."
Use the to check your state pension age.
But the problem with doing this too soon, is that withdrawing your pension from the stock market also means it's not growing if the stock markets rises.
Pension provider Aviva reckons the impact could cost you thousands.
It found that someone whose retirement age is incorrectly set at 60, for example, could miss out on nearly £10,000, while those with a default pension age of 65 stand losing £4,000.
And with automatic enrolment forcing employers to opt staff into workplace pensions, millions could be affected.
3
Martin explained: "If you have a DC workplace pension - that’s one of those where you build up a pot of money with your employer and not one of those where you have a final salary - Aviva has worked out that many people have the wrong retirement age set.
"They have a default retirement age but lots of people are living later.
"With default investment schemes, which you haven't chosen yourself - it's been picked for you - what happens is, as you get nearer retirement age, it de-risks.
"So it moves you into lower risk funds and away from stocks and shares, which is the right thing to do as if you happen to retire when the markets are down and all your money is in the markets then it's a problem.
What are the different types of pension?
WE round-up the main types of pension and how they differ:
- Personal pension or self-invested personal pension (Sipp) - This is probably the most flexible type of pension as you can choose your own provider and how much you invest.
- Workplace pension - The Government has made it so it's compulsory for employers to automatically enroll you in your workplace pension, unless you choose to opt out. These so-called defined contribution (DC) pensions are usually chosen by your employer and you won't be able to change it. The minimum contributions have risen to 8 percent, with employees now paying in 5 percent and employers contributing 3 percent. This is up from the 5 percent of contributions workers and companies were required to pay in last year, where employees contributed 3 percent and employers 2 percent.
- Final salary pension - This is a also a workplace pension but here, what you get in retirement is decided based on your salary, and you'll be paid a set amount each year on retiring. It's often referred to as a gold-plated pension or a defined benefit (DB) pension. But they're not typically offered by employers anymore.
- New state pension - This is what the state pays to those who reach state pension age after April 6 2016. The maximum payout is £168.60 a week and you'll need 35 years of national insurance contributions to get this. You also need at least ten years' worth of national insurance contributions to qualify fullstop.
- Basic state pension - If you reached the state pension age on or before April 2016, you'll get the basic state pension. The full amount £129.20 per week and you'll need 30 years of national insurance contributions to get this. If you have the basic state pension you may also get a top-up from what's known as the additional or second state pension.
"The longer you've got to ride out those waves the better it tends to be.
"But if your retirement age is set wrong then you move into these lower risk funds too early - usually 15 years before you're due to retire."
Colin Williams, managing director of workplace savings and retirement at Aviva, added: "De-risking profiles have been carefully designed to balance risk and return in the approach to retirement.
"But this balance is thrown out of kilter if someone wants to retire at a different age than was originally assumed when they started their pension.”
3
There's no right or wrong retirement age - it comes down to personal choice - but most workplace pension providers won't let you access the cash until you turn 55.
You will however, be given a retirement age from the government from when you can start to receive your state pension, and many people often time retirement from work with this.
MORE ON PENSIONS
It's been revealed that retirees are turning their pension pots into cash at a record pace - but it's dragging down savings rates for everyone.
The state pension age should rise to 75 from 68, a report recently suggested – raising fears some workers will NEVER retire.
If it does, retirees will need to save an extra £84,000 in order to avoid poverty.
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at [email protected]
Topics