Annual pension statement - do you read yours?

Annual pension statement – do you look at yours?

Have you ever received a little something in the post that says, usually in big bold letters on the front, “YOUR ANNUAL PENSION STATEMENT OR ANNUAL BENEFITS STATEMENT”? Or something to that effect.

It’s hard to miss. But often people do. Your annual statement is a document that your pension provider is obliged to send you, so that you have a record of how your savings have been getting on.

From the performance of your investments to the charges and costs associated with managing them, this is everything your annual benefits statement will tell you:

1. A grand total of everything you have in your pension.

2. A breakdown of the charges you pay to the provider for managing your pension.

3. An estimate of the eventual value of your pension at the date you’ve marked for retirement.

4. Pointers and ideas for steps you could take to get more money in the future.

Tot it up

The first section is why we’re here. The number we’ve all been waiting for. The number you see here is what you’ve saved since you joined the pension - whether you were auto-enrolled or opted-in. This is what all those contributions have been working towards - but it also includes any employer contributions (if it’s a workplace pension) and the government’s tasty tax relief top-up.

Charges

Your pension is managed by a provider, and they will invest your money into funds with the aim to increase the value of your pension over time. Whilst this - in the long run - can increase your pension’s value, you are charged a management fee or a service fee. Usually you’ll pay two different charges: a monthly administration fee to keep things ticking over, and an annual investment charge which covers the cost of investing.

Projection Perfection

The next section of your annual benefits statement looks at a projection for your pot. It’s a forecast that estimates what you could expect to get back when you eventually retire. The estimated figure is based on if you were to carry on saving at the same rate and can be a good reference point for working out if you’re on track for the retirement lifestyle you’re aiming for. That being said, the projection is also where you can perfect your saving.

Moving forwards, not backwards

The final part of your statement provides some ideas about what you could do to save better. It prompts you to think about what you want out of retirement - so getting to grips with your financial wellbeing, your financial vision, could bring things together. And, if the forecast seems low, you could use the information in the statement to increase your contributions to get you back on track to retirement.

Receiving your statement is a good time to take stock of your pension and your future plans. It takes just 15 minutes to look through, so why wouldn’t you want to know your way around your annual pension statement?

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