Pensions need TLC… and a boost from Chancellor Jeremy Hunt, says RACHEL RICKARD STRAUS
What item in your possession has the highest monetary value? Maybe your home springs to mind, if you own it. Or your car – likewise. Or perhaps a family heirloom.
But I wonder if you considered your pensions. For millions of us, they take first or second place on the podium. They are a greater store of wealth than property in the UK.
So, considering how valuable they are, it is surprising how often pensions are neglected. Annual statements are chucked in the recycling or to the back of a drawer with little more than a cursory glance. When divorcing couples split their assets, pensions are frequently not even mentioned. There is over £19billion in pensions that have been forgotten about altogether.
But just like other valuable possessions, give your pensions a little TLC from time to time, and they’ll pay you back in spades. And the good news is, unlike homes, they don’t need hours of sprucing, cleaning and repairing. And unlike cars, they don’t need expensive MOTs.
Workplace pensions, in particular, are designed to require as little engagement as possible. Pension providers know that picking funds is not most people’s idea of a good time, and want to ensure we get the best possible outcomes by default.
TLC: The tax system should incentivise us to save for our own retirement
But as Stephanie Hawthorne’s report opposite reveals, that doesn’t mean they can be ignored altogether. She looked under the bonnet of some of the most popular workplace pension funds and discovered that their performance varies wildly.
Some of us will have enjoyed bumper returns over the past few years, while others of us have fared much worse. Inevitably there will be winners and losers from year to year. Pension providers follow different strategies, so performance will vary in different market conditions.
If your workplace pension has had a dud year, that doesn’t necessarily mean it’s a bad one.
But what you need to look out for is if yours is repeatedly producing low or even negative returns. Secondly, watch out if your pension is losing money while financial markets overall are having a good year.
That should get alarm bells ringing. You can find out all that information with a quick check of your annual pension statements or getting in touch with your pension scheme provider.
Unfortunately, we have no say over which provider our workplace pensions are held in. Employers pick a scheme, and we like it or lump it.
But that doesn’t mean we’re powerless. If you’re not happy with your scheme, you can complain to your employer. And if you think your pension is in the wrong fund, you can ask your scheme provider to move it.
That’s what we can do to keep our workplace pensions in rude health. That and paying in as much as we can afford. But there’s plenty more that could be done by the pension industry and Government to help us look after these valuable assets.
The most useful single step would be a pensions dashboard, where we could log on and see details of all of our pensions in one place.
We wouldn’t have to wait for dry, annual statements sent through the post – unless we wanted to. A dashboard would give us a snapshot at any one time of what we have and how our funds are performing. It would give us a much better idea of whether we’re on target for the retirement we want – and what we need to do to get back on track if not.
But the dashboard, which was due to go live in 2019, has just been delayed yet again. We no longer even have a timeframe of when it could go live. Every additional delay lets savers down further still.
Of course, we need it to be right, and it’s no small undertaking, but a pensions dashboard should be an absolute priority. Top of the Pensions Minister’s in-tray. Not shoved in the back of a drawer.
Chancellor Jeremy Hunt could also help give our pensions some TLC in his Budget on Wednesday.
The tax system should incentivise us to save for our own retirement. The more we save for ourselves, the less dependent we will be on the state later on.
So it is ludicrous that there are tax rules that are currently discouraging some people from saving – or even working. I hope Hunt fixes it. We’ll be watching on Wednesday to see that he does. It’s time we all gave our precious pensions a little love.