Pensions savers could miss out on THOUSANDS of pounds by not letting their provider know when they plan on retiring
PENSION savers are being warned they could miss out on as much as £10,000 in their pot by not updating their planned retirement age with their provider.
The risk is greater for those who know they’ll be working past the state pension age, whether by choice or because they cannot afford not to.
Insurance firm Aviva found those who fail to notify their workplace pension provider of a change in when they want to retire could end up being moved to lower risk funds too early.
This is known as automatic “de-risking” which sees investments changed from higher to lower as the person nears retirement to protect their savings from sudden market movements.
But Aviva says that if pension pots are switched too early, the saver risks losing out on investment growth just at the point when their pension pot is at its largest.
This could therefore mean bad news for those whose policy holds a lower retirement age than when they'll realistically stop working.
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 they have 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.
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."
Under previous rules, every woman was entitled to get her state pension at 60, while the age for all men was 65.
But now, anyone aged under 41 won’t be able to get their state pension until they turn 68.
Aviva says this can cause serious financial repercussions for savers under 41 whose provider still has a retirement age of 65 noted on their policy.
They estimate that future retirees whose age is incorrectly set at 60 could miss out on nearly £10,000, while those with a default pension age of 65 standing losing £4,000.
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. The pension provider is 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.
- 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.
Based on Aviva's findings, a worker earning £27,664 and automatically enrolled since the age of 22 would get a total fund value of £137,600 if their retirement age is set to 68.
But this drops down to £127,700 if their policy has their pension age at 60.
Aviva told The Sun that since 2012, more than 10 million people have been automatically enrolled into a workplace pension.
The insurance firm added that this group is the most vulnerable to losing money.
Colin Williams, managing director of workplace savings and retirement at Aviva, said: "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.”
Many providers allow you to check and change your retirement age online.
If it doesn't match your current plans, change it to make sure you aren't switched onto a lower risk fund ahead of schedule.
MORE ON PENSIONS
Earlier this month, it was 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 suggested last month – 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]