Your pension's tax benefits

On 13 March 2024 our pension expert Clare Moffat and Consumer Finance Specialist Sarah Pennells hosted a live session all about pensions and tax. They covered how to make the most of your pension.

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Hi, I’m Sarah Pennells and I'm the consumer finance specialist here at Royal London.

Hi, I'm Claire Moffat and I'm Royal London's pensions expert. And today we're talking about your pensions tax benefits.

Well, we've had a number of questions sent to us in advance and we'll be answering some of the most popular ones in the next 35 minutes or so. But we have left plenty of time for questions at the end.
So if there's a question that you'd like us to answer, then you can submit it using the Slido link. Now, as with all our webinars, if you've been to one of our before, you'll know that we can't answer a question.
It's about your specific circumstances or about the Royal London policy. Couple bits of housekeeping before we get going. We'll be recording this webinar and we'll be sharing a link to the recording with everyone who registered for it. And then finally, we had over 6200 people who've registered for this webinar. So there's probably a lot of people on the call if for any reason during the webinar, the stream freezes, just refresh your page. I've been told that should sort out the gremlins.

So Sarah we're talking about how your pension can save you tax. Where do we start?

Well, there's a lot we're going to be covering in this webinar. We'll be explaining about tax relief. We'll be telling you how much you can pay into your pension and still get that government tax top up. Will also be explaining salary sacrifice and also talking about a change that could affect some people in relation to tax free cash. But the end of the tax year, April the 5th, it's only a few weeks away now. So I think Claire, let's start with that. What is it and why is it so important?

Well, in the UK, the new tax year begins on the 6th of April every year. Now, normally this would be the time that any increases or decreases to tax and national insurance take place. This year well, it was a bit different and that's because we saw a decrease to National insurance for employees in January.So hopefully you've noticed a small difference in your pay already. Now, if you're self-employed, you had to wait until April for that. But actually we've had a second reduction which will kick in in April because of last week's budget. But tax year end is also important because it's the date that new allowances and limits apply from. And we'll talk about some of these during the session. It also means that before the tax year there can be some things some opportunities to take advantage of. If you haven't used up all of these limits. And we'll talk about how you might take advantage of some of these before the 6th of April.

And if you've ever wondered why the tax year end is in April the fifth.Well, apparently it dates back to 1752, which is the date when the end of the tax year was moved from the end of March. Enough of a history lesson.

Let's get on with the webinar.

Let's start with our first poll.

Now, the question is, do you know what tax relief is? So please vote now using the Slido link.
Just watching the numbers go up and down just now.
So it's an even split just now actually, yeah.
It's about 55% of people are saying that they know how tax relief, what tax relief is and how it works.
And about 44% saying no.
And it's it's interesting because this actually echoes some research that we did right at the end of last year.
Now, we asked 4000 people about pensions and tax and what they understood.
Now we found that only half of people who have a pension knew that they get tax relief on their pension contributions.

Now, we've also had a question which was submitted by James, who said he wants to know how tax relief works. So it's obvious it's not clear to everybody exactly what's involved. So I think it really is worth Claire spending a bit of time explaining how it works.

So first you're going to have a think about how tax relief works if you're employed or you're a sole trader and you would pay income tax. Now, the easiest way to explain this is with an example,
So let's look at a slide. If you pay £80 into your pension and you're a basic rate taxpayer, then the government will top that up by £20, and that’s the tax relief So that £100 goes into your pension if you're a higher or additional rate taxpayer, then you'll get the extra tax relief at the higher rate of tax now that would bring the total tax relief for a higher rate taxpayer. So in the right, here to £40. Now if you've got an additional rate taxpayer, that would be £45. But and it is quite a but here, you will either get that tax relief automatically or you might have to claim it back from HMRC. So if you're paying into an individual pension
or some types of workplace scheme, then you'll get the same 20% tax relief automatically. But you might have to claim the extra 20 or 25% back from HMRC. Now you can either do this by filling in your tax return if you do that or by phoning up. But please don't miss out on money by not doing this. And more and more people are becoming higher rate taxpayers. So it might not have affected you in the past, but it could now. And we should also see that in Scotland you might actually get more tax relief because that's because the rates of tax differ and higher earners in Scotland pay more tax, which means they get more tax relief.

So Claire think the key message is that if you're a higher rate taxpayer or an additional rate taxpayer, then it's really important to check whether you need to do something in order to claim back that extra tax relief because you could be losing out. Now, of course, if you're paying into a workplace pension, then as well as the tax relief, you'll get the employer's contribution going into your pension as well. But Claire you might get a different kind of tax relief if you're a company director. Explain that, please.

That's right. So if you're a company director and the company pays the pension contribution on your behalf, then it's saving the company corporation tax. So that's called corporation tax relief.
Well, now it's time for our second poll. So this is definitely not a test. We just like to know a little bit about people listening and watching today. So please let us know whether you're employed, not working, self-employed or retired.

So again, interesting at the moment, the vast majority of people Claire are employed, a few retired and a small percentage self-employed.
So we'll give it a second or two just to settle down.

But I think that seems to to be the way and, you know, it is important to think about the differences between employees and directors when we think about how much can be paid into a pension.
Now we had a question from Alison, who wants to know what's the maximum that she can pay into her pension in the current tax year? So we're in 2023, 2024. So Sarah what's the answer?

Well, Alison, it's a really great question. It's a simple question. And the simple answer is that you can pay as much money as you want into your pension, but you probably know better than this. The answer, in fact, is a bit more complicated. So let's just have a look at the rules. Say you're employed, in which case you'll be being paid an income. You might be getting overtime, you might be getting a bonus. Now, the rules say that you can pay as much as you want. You can pay all your salary, all your bonus, all your overtime into your pension. Of course you would do that. You'd have no money left to live on. But you could do that now, you could also pay in any savings you have lying around as well. However, there is a limit on how much you can pay into your pension and get tax relief on the contributions and that limit
is a maximum of 100% of your earnings.
So if we take the example of someone who's employed and who's earning £30,000 a year, then what the rules say is they could pay the whole £30,000 into their pension. Now, as I said before, very few people are going to do that. But there may be situations where it's actually important to know what the rules say.
For example, you might have inherited some money and in which case you might want to pay a large amount into your pension. Now, if you are self-employed and you are working as a sole trader rather than through a limited company, in that case, you will pay yourself an income and again, the rules say that you could pay up to 100% of that income into your pension and you get tax relief on the contributions. Now, I gave an example a moment ago, someone earning £30,000 a year. Now, if you have a much higher salary than that, then there's another rule which could limit how much you pay and your pension, and we'll be talking about that in just a moment. But Claire, you mentioned earlier on company directors,
so if you take maybe salary in dividends, what is the situation there?

So if you're a director of a limited company, then normally what happens is you take a small salary and that's to make sure that you get state pension and other benefits, but you take the rest of your income in dividends, and that's because it means you would pay less income tax. But as we mentioned earlier, if you're a director, pension contributions would normally be paid by the company because that saves the company corporation tax. And it means you don't have to worry about those limits that we just spoke about. For people who are employed or a sole trader, there's no limit to the amount that company can pay into a director's pension if it's for the purpose of the business. But in reality, the company wouldn’t normally pay more than the annual allowance, or the director would have a tax charge. So more than that, and that's about annual allowance. Now, there's one other group that's worth mentioning, and that's those who have a business renting out properties, now there are really quite specific rules about pension
contributions for people who are landlords. So it's really worth taking financial advice on this.
Now we've had another question, which is from Amanda, who says, I've heard that you can have a pension if you're not working and don't have earnings. Is this correct? The answer is yes, absolutely. You can do have a pension and pay into it even if you have no earnings. Now, the maximum you can pay into a pension in this situation is £2,880 a year. Now, you will get that tax relief at the basic rate of 20% on top of that. So that means that £3,600 a year maximum could go into your pension in any one tax year. Now anybody can have a pension, even children can have one. Although if children do have a pension that it's quite often the grandparents who are paying into the pension on the grandchild's behalf to kind of help secure their financial future. One thing that's worth mentioning, though, which is if you are paying into a pension, then tax relief on your contributions stops once you reach the age of 75.So once you hit your 75th birthday, you can pay more money into your pension, but you wouldn't get tax relief on those contributions. Now, in reality, very few people are going to be working when they're 75, but it is just worth being aware of that rule.

I mentioned that the end of the tax year was a deadline for some things, and one of those things is annual allowance. I'm going to spend a moment or two talking about annual allowance. The first thing to say though is that the annual change will not affect most people in the UK, and that's because most people will be paying less into their pension than the annual allowance amount.

But it is worth explaining how it works, and that's because we get a lot of questions about it.
But don't worry if you don't remember all of what I'm about to say because we've got a guide called How Your Pension is Taxed and that explains annual allowance too.
So what is it?
Well annual allowance is the limit on how much money can go into your pension in any one tax year without paying a tax charge? It is not the maximum pension contribution you can make. And that's what Sarah just spoke about. You could still pay more into your pension if you wanted to and you could afford to and you had the earnings to support it, but you would have a tax charge to pay for the amount over the annual allowance. The annual allowance is currently £60,000 for most people and it increased from £40,000 last year. So with our earlier example of someone earning £30,000 a year, they wouldn't be affected by the annual allowance because their salary is significantly below their annual allowance level. But say someone earns £100,000 the most that they and their employer could pay into their pension in the current tax year without a tax charge would be £60,000. So it's a lot of money that you could potentially pay into your pension. So that's the annual allowance, but kind of linked to that is a tax concession and that's called carry forward. So what it means is that if you haven't used annual allowance from the 3 tax years before the current tax year, then it is possible to use that if you want to pay a very large amount into your pension. Again, this isn't going to affect most people. And if you're thinking of using this, then you should take financial advice. But again, it's worth explaining the basics about how it works and also it is only relevant, if you can pay large contributions into your pension and you have the earnings to match the amount of the pension contribution want to make, or perhaps should a company director in the companies paying the pension for you. So in the example I mentioned a minute ago, if that person earning £100,000 hasn't made any pension contributions in the previous tax year or the two years before that, then they would have carried forward developing. So their salary is £100,000, annual income is £60,000, and they’ve not made any pension contributions last year. So they could actually pay £100,000 into their pension without a tax charge because they'd be using £60,000 of annual allowance from this year and their £40,000 of allowance from last year as carry forward.
Now as I mentioned, financial advice is invaluable here, and I'd say especially so if you're a very high earner in a defined benefit scheme like one of the public sector schemes, because working at carry forward for these type of schemes isn't as easy as adding up how much you and your employer and have paid into your pensions. And if you want to find out more about how carry forward works, there's a really useful article on the independent and government backed money Helper website and you should know if the annual allowance will apply to you because you will receive a letter explaining this from your pension scheme.

Well, we've had another question and this one is from Ajay. He wants to know if I pay more into my pension, will that save me income tax? And again, I think it's worth explaining it with an example. So if we have a look at the slide here, we can see the amount of tax that somebody would pay if they lived in England and were earning £51,270 a year. Now if there's no pension contribution, they would pay £7,940 in income tax. But if £1,000 goes into their pension, then the income tax they pay goes down to £7740 and they have that £1,000 in their pension. So you're thinking, well, how does that work? Well, in the calculation, they were paying a higher rate of tax on £1,000 of their earnings. But workplace pension contributions get taken off your income before tax is deducted. So that means instead of paying tax on £51,270, they're paying tax on £50,270. And that's important because £50,270 is the higher rate tax threshold. So you are only taxed on income at the higher rate on income you receive above this amount. Now of course that's one specific example, but it is worth saying that even if you're not on that higher rate tax threshold, then if you pay more money into your pension, it could still save you tax.

So that explains how you save tax when you're paying into a pension, but Dawn has asked a slightly different question about saving tax. So she said, I contribute to a work salary sacrifice pension. I know this reduces my national insurance and my tax, but do I still benefit from that 20% contribution from the government? So Sarah before we answer that, I think we probably need to explain what salary sacrifice don’t we.

Yeah, absolutely. So with salary sacrifice and it's often also called salary exchange, you exchange a percentage of your salary in return for your employer paying all the pension contributions into your pension. Sounds a bit confusing. So let's again explain it with an example. Let's look at our pension policyholder who's called Sam now, there's a lot of figures on this slide. I'm really aware of this. The main thing I want you to concentrate on is Sam's position before and after salary exchange. Now, before salary exchange, Sam earns £35,000 a year. Now he pays tax and National Insurance on that, and he makes a pension contribution of £1,400. Now his employer pays £1,050 into his pension. His take home salary is £26,422. Now, if he's to choose salary exchange, it means his salary is lower just around £33,000. He makes no pension contribution at all, and that's because his employer is paying the pension contribution for him. And his take home salary is still £26,422. So you're thinking, well, why would Sam do this?
The answer is because of the tax and National Insurance saving, because using salary exchange, there's actually £3,251 going into Sam's pension compared to £2450 without salary exchange. Now, employers also sometimes pay in some or all of the national insurance that they save into your pension. But even if they don't, it is still a saving. Now more money can go into your pension from the same take home pay as in the example with Sam or you can have the same money going into your pension and have a slightly higher take home pay. Now it's worth saying, and Claire mentioned this at the start, that in the budget last week the Chancellor announced that the national insurance rates would be falling from April 6th. So that will slightly reduce the benefit of using salary sacrifice and it could mean a little bit less goes into your workplace pension. However, having said that, for most people, salary sacrifice, or salary exchange is worth considering. Now it is worth pointing out that salary exchange involves a change to your contract
and that has to stay in place for 12 months. If there are circumstances where it won't be in your interests, your employer should give you information about that. So, for example, you cannot use salary sacrifice or exchange if it means that you will pay would be taken below the minimum wage. Now, if you'd like to know a bit more about salary sacrifice, I've written an article which is on the Royal London website and will also link to it from the webinar page. If you receive a bonus through work, then your employer may offer bonus sacrifice or bonus exchange, and it works in exactly the same way.Okay, enough for me, I think.
Time for another poll.
We'd like to ask you if you're employed and we know the vast majority of you on the call are. Does your employer offer salary sacrifice? Do you know whether this is something that your employer offers?
So please vote now using the Slido link.
So it's looking about sort of 58% do offer it.
30% so far, not sure.
About 15% saying, they don't offer. Yes.
I mean, this is interesting.
It's interesting that most employers do offer it is worth saying that there are some tax benefits to employers for offering this.
So for those people who just voted in the poll, whose employer doesn't offer it, or if you're not sure, it might be just worth asking them because it may be something we employ decides they want to do. Yes. So if we think about the question that Dawn asked, if your employer does offer salary sacrifice, and that's how your pension contributions are made, you don't get the tax relief added on. So it might not feel like you get that tax benefit, but you actually do. And that's because your pension contributions, well they're taken off income before tax is deducted.

Now, we've had another question from Claire, who says,I think I should increase my pension contributions, but is it worth it? I think the first thing to see is that we know that we're still being affected by the cost of living squeeze, and a lot of people continue to make some really tough choices about what they spend their money on. However, last year we did some workplace pension research with 6000 people. 4500 of those people had a pension.And what we found, while I think it surprised us, one in 20, so 4% told us that they had reduced their pension contributions in the last year, but one in ten, so 9% were thinking of reducing their pension contributions in the coming year. But where it gets interesting is that 13% of people said they'd increased their contributions in the last year, so about three times as many as had reduced their contributions and 15% of people, so more than one in seven were thinking of increasing their contributions. Now, you might be thinking, well, of course, a pension company is going to talk about paying more into your pension, but this is what our independent research is showing us. And being blunt, you could spend 20 or more years in retirement and I don't think any of us
would want to spend our retirement struggling financially. So if you are in a position to pay more into your pension, how much should you contribute and actually what difference would it make? Well, let's look at some figures on the next slide. Again, there's a lot of numbers here, and I'm just going to kind of talk through some of them.
So in this example, we've got Nisha. She started working when she was 20 to paying into pension then. She's now 40. She earns 32 and a half thousand pounds. And she's interesting in finding out what difference it would make to her retirement if she increased her contributions. So currently there's a total of 8% going into Nisha’s pension at age 67 if her pension contributions stayed at 8%, then she would have £253,819 and her pension pot. But if she decided to pay an extra 0.5% into her pension, well, at age 67, then she would have £262,940. So an extra £9,100. Now, we're basing these calculations on growth of 3% every year after charges have been deducted, but hopefully over time while returns aren't guaranteed. You could get a higher return. But what if she increased her pension contributions by even more so by 2% and the total going into her pension was 10% of her salary? Well, her pot at 67 would then be £290,335. So that's a difference of over 36 and a half thousand pounds. But but what does that difference actually look like on a monthly basis? And so you're probably thinking that it sounds good, but most people can't afford to increase their contributions. So again, let's delve into this in a little bit more detail.
So with that 8% that was being paid, there is £216.67 a month in total going into Nisha's pension.
So £81.25 from her employer, £108.34 from Nisha, and £27.08 from tax relief. If she increased by that 0.5%, then the same amount of employer contribution would be happening, the amount of tax relief would increase and Nisha would pay an extra £10.83 a month. If she pays an extra 2% a month, though, again, the employer contribution stays the same more tax relief is paid and Nisha would be paying an extra £32.49. So again, that is a lot of numbers, but what's the key point here? Well, it's not a huge amount of money every month to pay while Nisha is working, but that could make all the difference in retirement.

You may be able to get even more going into your pension, and that's through something called employer matching, now employer matching Is it kind of does what it says on the tin kind of pensions arrangement? What it means is that your employer will match your contributions pound for pound up to a certain limit.
Now, again, let's have a look. I have an example with a slide. So at the moment, under the automatic enrolment rules, the minimum that will be getting into your pension will be approximately 8% of your salary. You pay 4% of your salary there is tax relief at 1% and your employer pays in 3%. Now, that will be going into your into your pension every month. And for this calculation, we're assuming that you're a basic rate taxpayer. But with employer matching, your employer might match your contributions pound for pound up to a limit of, say, 6% of your salary. So if you paid it an extra 2% of your salary, then that would mean that 6% would be going in every month. But then some of that will be coming from the government in tax relief. But your employer would also be paying 6% of your salary. So I know this sounds a bit like a maths lesson, but it means 12% goes into your salary and the salary goes into your pension in total. So under the normal situation, 8% goes in with employer matching 12%, so half as much. Again, you might be thinking this sounds expensive, but I think it's worth just unpicking the figures here. If we look at an
example where on a monthly basis an employee is paying £80 a month, then there's a tax relief on top, taking that to £100 a month, the employer's matching that, so they pay £100.

So in all, £200 a month is going into a pension. But if the employee decides to do matching up to that maximum level of 6%, then they pay in £120, it's going to be £30 going in in tax relief and the employer pays in £150 as well. So that means there's £300 a month going into the pension instead of £200. But in order to get that extra £100 into your pension every month, you just need to pay £40.
So remember the point you made earlier on, which is if you pay more into your pension that it also reduces the tax you pay. And that's because your pension contribution is coming off your income before tax is deducted.
Ok Claire, That's the theory. But how can you pay more into pension if that's what you want to do?

So if you can afford to pay more into your pension, that are two ways to do this. So the first is to increase your the amount that goes in to your pension every month. If you're an employee, then take your employee benefits website or ask your HR department. The second way is to pay in a lump sum.
Now, we've just covered off the first one, but what if you want to pay a lump sum into your pension?
So how do you go about that?

Well, again, it's a topic that many people find quite confusing.
So the research that we referred to earlier on, we found that one in five people didn't know that you could pay a lump sum into your pension and reduce tax. Having said that, though, one in seven people said that they'd already done this, they'd already paid lump sum to the pension to reduce tax, and about another one in five said they were planning on doing this. Now, in broad terms, there are two options. If you want to make a lump sum or a single premium payment into your pension so you can pay that money direct to your workplace pension provider and then basic rate tax relief will be applied to your contribution. So let's take an example where you pay an £800 and there'll be tax relief on top. So £1,000 will go into your pension. Now, as we mentioned at the beginning, if you're a higher rate taxpayer, then you really need to claim back that additional tax relief so you don't lose out. And you do that normally by filling in self-assessment return. Now, if your employer offers bonus exchange, then you could pay in a lump sum using bonus exchange instead. Now that we have another question is from Bryn. He says, You are 63 years old, he's a high rate taxpayer. Should he be paying a lump sum into his pension? So we've just been talking about paying lump sums in and the benefits of doing that. And what it means for your tax. But if you're over the age at which you can take money out of your pension, which is 55, currently rising to 57 by April 2028, then there could be other benefits as well. And that's because you could potentially take out tax free cash. So again, let's look at an example. So say I'm 63 and I wanted £5,000 to go into my pension while I'd only pay £4,000 because the basic rate, the other £1,000 would be tax relief at 20% relief. So the amount going into my pension, £5,000, I pay in £4,000, but £5,000 is deducted from my taxed earnings. Because pensions, as we say, reduce the amount of tax you pay.
Now, if you're a higher rate taxpayer, it would only cost you £3,000 because you get that 40% tax relief. But if you wanted to straight away, you could take 25%. The tax free cash lump sum out. So that would be 1250 pounds. That's if you wanted to take out that tax free cash that is.
And it's worth just also a bit of a reminder to hear that if you live in Scotland, then you would be getting more tax relief. So that would make that even more tax efficient because you pay more tax, so you get more tax relief.

Now, you can ask another question by Charlie and he asks, What is the best way to make the most of a pension if you're self-employed or a business owner? Now, as we mentioned, self-employed could mean someone who is a freelance worker, sole trader and a business owner of a limited company. And not surprisingly, far more people who are self-employed had paid in a lump sum. Our research showed that those who do a self-assessment form 59%, had either paid in a lump sum or were planning to, and only 12% of this group of people didn't know that it was possible. Now, often that's because they wait until the end of the tax year to see how well the business is doing before they pay into a pension. So to answer Charlie's question, it's probably a good idea to wait until nearer to the end of the tax year, because then you'll have a good idea of how much you'll be able to pay into the pension, what your tax bill will be, and actually how the lump sum can help reduce that. So Sarah we’ve spoken about making payments,
but we've got another question. I think it's more about the admin and Debs wants to know, Well, you know, what else is involved in making extra payments into your pension?

Well, you mentioned earlier on, Claire, about the end of the tax year. so April the 5th, this year it's on a Friday, but the Easter weekend is the weekend before, so it may come around a bit faster than you think. And it is really important to think about the end of the tax year if you are making an extra pension contribution and to make sure that contribution goes in the right tax year. And it's particularly important if, for example, you're about to retire or you've been made redundant because you may not have earnings in the next tax year to support the pension payments that you want to make. It's also particularly relevant if maybe a higher rate taxpayer at the moment. But you know that in the next tax year you'll become a basic rate taxpayer, and that's because, you know, you'll want to maximize the amount of tax relief that you can get on your pension contributions. And Claire mentioned earlier on the annual allowance as well.
Now, many pension companies will let you pay contributions into your pension up until April the fifth.
But in order to make sure that money is allocated to your pension in the right tax year, as in the current year, then generally you'll have to make that payment a few days in advance. It is really important to check your pension provider's website and see what they say or you could miss out. Now we mentioned the budget a couple of times and some changes announced in the budget and there was another change that the Chancellor announced relating to child benefit and the high income tax charge. Now, this is something that received a lot of publicity in the run up to the budget. It may not feel like there's a link
between the child benefit tax charge and pensions, but there is. So bear with me.
Under the current rules, if you living with your partner and one of you is claiming child benefit, then as long as you each earn less than £50,000 a year, then you can claim the whole amount of child benefit and there's no tax to pay on it. But if one of you earns over £50,000 a year, then there's a tax charge to pay. Now the tax is imposed on a sliding scale so that if one of you earns £60,000 a year or more, the tax charge wipes out the amount of child benefit that you'd receive. Now, you'd normally have to pay that tax charge by fitting in a self-assessment return. Now, not surprisingly, thousands of families have decided
not to register for child benefit because they'll pay tax that actually wipes out the child benefit they receive. However, it is really important to register for child benefit because it could protect your entitlement to the state pension. The reason is if you're not working by registering for child benefit, you'll get national insurance credits towards your state pension up until your youngest child's 12th birthday. Now it is possible to register for child benefit, but to opt out of receiving any payment. Okay, back to the budget changes. What the Chancellor announced is that from April the sixth £50,000 lower threshold will increase to £60,000 and the £60,000 higher threshold will increase to £80,000. Now, the Government says that this will help around 485,000 families. Now, some of those families could decide that, whereas previously they'd not registered for a child benefit or not claim the payment. They will now do so. It's worth pointing out that you can backdate a claim for child benefit for three months. Now there's another
change that the Chancellor said the Government will be consulting on,and that's to address the issue of whether a couple could be living together, one of them claiming benefit and they could each earn, for example, £49,999 and there would be no child benefit tax charge to pay. But you could have a single parent who earns more than £50,000 a year and they would have to pay a tax charge.
So what the government is consulting on is whether there's a way of looking at household income rather than an individual income when trying to work out about how much tax people pay.
Okay. So those are budget changes.
Where it's relevant in terms of pensions, that there is a way that you could actually be earning more than £60,000 from April six when these thresholds change, or even 80,000 and still not have to pay a tax charge on the child benefit. How does that work? The reason is because the income threshold is not just based on your salary or your earnings. It's called something. It's based on something called adjusted net income. Your adjusted net income is your taxable income minus any pension contributions that are made before tax is deducted or any pension contributions where you get basic rate tax relief applied and also minus any charitable donations you make using gift aid.So it may be possible for you to pay extra into your pension to bring your earnings below that threshold. That way, you don't have to pay tax charge on the child benefit and you have the bonus of more money going into your retirement savings as well. Now, Claire, that's a change that the Chancellor announced in the budget last week. But there's another change coming on April 6th, not announced in last week's budget, though, but from a previous one. Explain that, please.

That's right. And as you mentioned, that change is happening soon. So you might have heard last year that something called the lifetime allowance was going to be abolished. I'm going to take a few moments to explain the changes. And I'll be honest, the changes are quite complicated and they won't affect many people. But for those people who are affected, it is important to understand it. And again, this is something that we are asked about a lot, but it is also covered in our guide on how your pension is taxed. So let's start with the position now and what the lifetime allowance is and how it works. So it's the amount of pension savings that you could have in a lifetime without a tax charge applying. And that maximum is £1,073,100. Now, although a few changes happened last year, the lifetime allowance will actually go by the 6th of April this year. So what does that mean? Well, currently what happens is you use up part of the lifetime allowance at different points in time. So any time you take tax free cash and you start taking a defined benefit income, you move money into drawdown and you take a cash sum or you purchase an annuity. It's also take on your age, 75 and on death. But from the 6th of April, it's only taking tax free lump sums. That becomes important. So not when you take pension income, for example. During your lifetime, you'll have a tax free cash allowance that you're able to take from your pension. For most people, that will be £268,275. Now, again, that's a huge amount of money. So these rules will they're not going to affect many people. But this limit applies to tax free cash and includes the tax element of cash, lump sums.
There's also something called the lump sum and death benefit allowance. Now, this is only important on your death or if you're very ill and you take something called serious ill health benefits from your pension. Now, this restricts the total tax fee lump sums to a limit for most people of £1,073,100. I know that number. Well, it probably rings a bell. I just mentioned it in terms of lifetime allowance. But what ever you have taken during your lifetime in tax free cash, well, that's taken off this. So. So if you have taken, for example, £200,000 of tax free, then on your death there would be £873,100 left of tax free lump sums. If your beneficiaries want you to take it as a lump sum, if you haven't taken any tax free cash, then they would have the full amount of £1,073,100. Now, any lump sums taken above that. Well it would mean that your beneficiaries would have to pay income tax. But remember, it's only in relation to lump sums. So, say you were really fortunate to have £2 million in pensions, for example. And you died, you're under 75. Your beneficiaries could actually see a whole amount of £2 million income tax free if they moved at all into drawdown and they didn't take it as lump sums. Now you could have a higher amount of tax free cash and lump sum and death benefit loans if you have something called protection from the lifetime allowance. Now this is something that you would have applied for at points in the lifetime allowance reduced What I would say, is that if lifetime allowance affected you or if the lump sum allowance, sum and death benefit allowance affects you, please take financial advice because it's really crucial that you get help with this.

Right. Well, thanks Claire
We've covered an awful lot in the last 30 or nearly 40 minutes or so, but we've had quite a few questions coming in. And I can see the one that's had the most votes is from Richard. And he wants to know, how do you claim higher rate tax relief? I think it's a really good question. In fact, it's been echoed by a couple of the other questions we've had. So what's the answer, Claire?

So I think and this is where it is quite difficult because it really does depend on how your scheme works and so it's really important that you find out what happens. And because if you're in a scheme where it's like a salary exchange scheme, you don't have to worry about claiming anything back because as I mentioned earlier, actually what happens is that kind of pension contribution is coming off before you pay any tax, so you will get your higher rate relief as part of that. But if you're paying individually into a pension that you've just set up yourself or you're paying into a personal pension that isn't a salary and exchange pension, then you might have to claim that back from HMRC. So make sure you do that and if you fill in a self-assessment return, it should be easy to do through filling in your return or you can phone HMRC, but do make sure check that. You can go back a few years as well. So if you haven't done it for the last five years, you can actually claim that back as well.

That's really helpful to know. So the next most popular question is from Scott, and he says. For the high rate taxpayers, do they get the high rate tax relief on all pension contributions or only the percentage above the 40 40% tax rate?
So, yes. So that's a really good question, too. It is only the part you're only going to get tax relief when you you would have paid tax on that. So, for example, in that example we looked to earlier for was £1,000. And then it took someone to be a basically taxpayer. They're going to get 40% tax relief on that thousand pounds. But see, the bigger pension contributions, they would have some at 20% and some 40% tax relief.So yeah, so that's really good question, but that's how it works.


So another question, which is from Nick says, As my salary is less than £12,750, I'm not a basic rate taxpayer. So does tax relief apply to any personal contributions I make to my pension? Again, a really good question. We sort of covered it earlier on. Worth reiterating, though, isn't it? Yeah, that's right.

So you can still you know, we spoke about the fact that you don't actually need to be, you don't have to have any earnings. You can pay up to that £3,600 a year and you actually get tax relief and you only have to pay £2,880. So, yes, you can still get the tax relief and even if you're not actually paying tax.


Ao another question, which is from Gordon, who says, Do individual one off contributions into a pension, i.e. not at salary sacrifice, also attract tax relief?

Yes. So, you know, if you're paying into an individual pension again, so maybe you've kind of you might be self-employed, you've set up yourself, then you're still going to get tax relief paying in that lump sum. But also, if you're saying into a kind of a workplace scheme, you want to pay a bit extra, then you're still going to get tax relief on that pension contribution. So yes, it doesn't really matter kind of how it's paid in. You're going to get tax relief.


So we've got a question from Stephen who says, I finish paying national insurance contributions at 65, now 70 and still employed. How does this affect my pension tax position?

I think this is really interesting because also when the National insurance changes were announced last week, obviously, if you if you're over state pension age, you don't pay national insurance. Even if, like Stephen, you're working. So and did Stephen say in that whether he's in a salary exchange. No just that he is 70 and still employed. So you would still get tax relief because he's working but if it was a salary exchange scheme because you're over 65, you're not paying national insurance anymore, which is a benefit when you're if you are still working, you don't pay that you wouldn't if it was a salary exchange scheme, you're not going to see a reduction in national insurance because you're not paying national insurance, but you would still see the benefit of any tax relief. And we talked about an example earlier of someone who is over the age where they could access pensions, actually paying in more to your pension.
You've got the added benefit of if you want to, you can take some money out your pension, you do have to be careful though. And that's and we covered it before. We've spoken about something called the money purchase annual allowance and if you take more than tax free cash, you might be limited to the amount you can pay into a pension. So that limit is £10,000, so you have to be a bit careful if you are over the age where you can access pensions and you can't, for example, kind of pay in £40,000 a year to be taking £20,000 a year because you will have triggered that money purchase annual allowance.
But again, in our tax guide, there's information about the money purchase annual allowance, but certainly you can still be paying into pensions and taking out tax free cash. You just have to be careful. If you take any more than tax free cash or you take one of those cash lump sums.


So we've got a question from Shuang, who says, I've been told by my employer that I cannot pay the majority of my earnings into my pension and in quotes, “as they must pay me the minimum wage”. So this goes back to something we talking about earlier on Claire, so is this true?

Yes, so it sounds like that’s a salary exchange scheme and you can’t salary exchange. So you can't reduce your salary below the minimum wage. So that is a legislative provision and that's to make sure that people aren't kind of sacrificing salary and then ending up with not enough to live on essentially. So I think that's probably what's happened there. And we did see really, it's up to your employer will keep you right about these things. Now, if you kind of have other income, for example, or you’ve inherited some money or things like that, you still could pay into a separate pension if you wanted to. Or with that, there's still options available, but salary exchange isn't allowed. And we mentioned that you know, salary exchanges is part of your employment contract. So it's governed by employment law as well. And so employers have to stick to the rules on this and there might still be other options.

Okay. So you've had another question. It's really good one. And this alludes again to what we were saying earlier on. I think it's in response to Amanda's question. So this question is from David, who says, Can I pay into a pension for my wife who isn't working? And if so, how much can I pay and will I get tax relief on my contributions? So we mentioned that anybody can be in a pension.

So we mentioned even children. But actually so if you've got a non-working spouse, perhaps your spouse has stopped working and they were looking after children full time, then it's a really good idea to still be paying into a pension for them, it is limited If you've not got any earnings to that £3,600 a year. So that's £2880. And then the government will talk up that difference to £3,600. But the tax relief is actually on the individual who's receiving it. So that tax relief will be added on. So you would if we still checks, we don't really write cheques anymore, but it's easier to kind of explain it. If you could write a check for £2,880 and it would be made up to £3,600, that would be going into the wife's pension in this example. And so it's kind of it's a great thinking of it sometimes pensions on a family basis. So that's going to add it might not seem like a huge amount, but it's going to add to that pension pot. And we really see that people have taken to kind of time out at different points in their lives then if you can carry on paying, then that's going to help on a kind of family basis when people are in retirement. So just to clarify that, David asked the question, if, for example, I don't know, but if David was a high rate taxpayer and he wouldn't be able to claim back any extra tax relief on the money he pays into his wife's pension. Okay. That's how the tax relief, even if it was a child, it would be that child. So someone else would be paying the money for them to. It would be kind of that child, who’s getting the benefit. Now, you could have the situation and sometimes we've seen it where you have grandparents paying for adult children and not maybe also children, grandchildren. Now, if you're if you're paying a contribution for someone who has earnings then it will be at that person who you're paying the contribution for. So say you had a child and you want it to be a pension contribution and they were earning £52,000 a year, then you could actually pay a contribution. they could be taken out of paying higher rate tax. So it benefits that person because they are at a higher rate taxpayer. But it's that individual who's receiving the money into their pension that the tax relief is attached to. So if that person's a higher rate taxpayer, they will get the benefit of higher rate tax. For the person writing the cheque again, I'm going to use these kind of things that we don't actually do anymore. So I've moved on and. There could be a benefit for them If things like if you've got an inheritance tax problem, it can do things like reduce your inheritance tax bill, potentially. But they're not going to see the benefit of any tax relief and they can't claim it back from HMRC. We've had a couple of questions that are very similar, so we’ll group them together. So one is from Ilinca, just so hope I pronounce your name correctly, and the other is from Francis. And basically it's does the annual allowance cover both employee and employer contributions? Yes. And when we think about a defined contribution pension. So the majority of pensions now, it's quite easy to know. My employer's paying £15,000 a year and I'm paying another £30,000 a year and you kind of know how much of the annual allowance you’re using up it's worked out definitely for defined benefit schemes and that mostly we think about public sector schemes. So it's not quite as easy to work as that and it's about the increase in the value over the year. But yes, it covers both of those.

And we've had another related question, which is from Megha who says, Can you clarify the annual allowance of £60,000 for pension? And she says, I see that's the maximum one campaign to pension and get tax relief. So that's absolutely right.

But just a. Well, I think we have to kind of disengage these two things. So it's the coverage at the beginning. What you can pay tax relief on and that's that or that's related to your earnings. Salary. And that's different to the annual allowance. So theoretically you could pay, you could be earning £200,000,
you could pay £200,000 in pension contributions and receive tax relief, but you would have an annual allowance charge on anything over £60,000 if you didn't have some carry forward available. So they're kind of separate but linked in some ways. And and so it's what really is happening with the annual allowance tax charge. It kind of takes away the benefit of tax relief, which is why most people think, well, there's not. Because it's the same as. You pay if you're at a higher rate taxpayer then the tax charge you would pay, your annual allowance tax charge. which you self-assess for, would be the same as the tax relief you would receive. So they're kind of linked, but not quite the same. But foremost people you would make sure that actually you're thinking. So you're thinking about kind of annual allowance and what you can pay, but also making sure, do I have the relevant earnings to support that, unless you are a director of a LTD company. So it wouldn't be unusual if you are a director of a limited company. It's not linked to your earnings, so you don't have to worry about that and having the earnings to support it. But you might have been building up a business for a long time. We see this often and someone wants to make the most of paying a lot in now because maybe they're thinking of retiring in a few years. And so they use this year and they use the previous year's carry forward. So you can see very large contributions going in,
but they're not in a position where they have to have earnings to support it. So it is quite complicated and they are sort of linked, but it's almost looking at kind of what, could I pay if you did have a lot of earnings, you might be restricted by the annual allowance because you wouldn't want to be a tax charge.

Great stuff.

Well, I think that's actually all we've got time for. We can't answer any more questions. I can see some coming in. Just worth saying we do have a look at the questions. We do try and answer them in future content. So if your question wasn't answered today, then we will try and get round to it and either articles will guide indeed future webinars. But we do have one last poll before we go, so please vote because we'd like to know what topic you'd like us to cover in a future webinar. Do please vote now in our poll.

Okay, So there's a lot of change here at the moment. How much do you need for your time and see the most popular? But it has been changing around quite, quite dramatically. So we will obviously wait for the figures to settle down and then we will make sure that we take your feedback into account when planning future webinars. Well, that's all we've got time for today and we will be sharing a link to the recording of the webinar in the next few days. But in the meantime, thank you very much for joining Sarah and I today.


Whether you're close to retirement or just looking to plan ahead, it helps to know your different options when it comes to taking your pension money. On 6 December 2023, our pension experts Clare Moffat and Sarah Pennells covered their tips on how and when you can access your pension savings.

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Sarah Pennells: Hello, I'm Sarah Pennells, and I'm a consumer finance specialist here at Royal London.

Clare Moffat: Hi, I'm Clare Moffat, pensions and legal expert here at Royal London. Today, we're talking about how to take money out of your pension. So, we'll be talking about the rules as to how much tax free cash you can take. We'll be talking about when you can take money out, and also, how you can take that money out, and the different options available.

Sarah Pennells: Now we've had a number of questions submitted in advance, and we're going to answer some of the most popular ones in the next 25 minutes, or so. But we will also leave time at the end to answer some of your questions, so do, please, submit a question via the Slido link if you'd like to ask one. Now having said that, we can't give an answer to your specific question, or if you have a query about a Royal London product. Now it's also just worth reminding everybody that we are recording this webinar, and we'll be sharing a link to it with everyone who registered, and through our newsletter. So, Clare, the title for this webinar is all about taking money out of your pension, but let's go back to the basics, what are we actually talking about here?

Clare Moffat: So, when we talk about taking money out of your pension we're talking about you deciding when you want to take money out, how you want to take it out, perhaps whether you want to take large lump sums, or a regular income. So, we're really talking about defined contribution pensions. Now that's the type of pension that pension providers offer to you individually, or through your workplace scheme. And that's where you have a pot of money which you use after you've stopped working to provide an income in your retirement, but you don't have to wait until you've stopped working. You might take some money out before then. Now there's another type of pension called defined benefit pensions. Now that's the type of pension where there's a promise made to pay you a certain amount for the rest of your life. Now these type of pensions normally start when you stop working. Public sector pensions are the most common type of defined benefit pensions around now. Final salary pensions are one type of defined benefit pension that you might have heard about, but there are others available.

Now when you start taking a defined benefit pension it's almost like you are getting your salary every month, but you'll get less, of course, but what you can't do, is you can't just dip into that if you need a little bit extra, or perhaps you want to take less. And that's why we're concentrating on talking about defined contribution pensions today.

Sarah Pennells: And there's another reason as well. So, in the summer in July, we carried out some research into workplace pensions. Now we had a, a sample size of 6,000 people, and 4,500 of them had a pension. And what they told us was that most of their savings were in defined contribution pension. So, that's another reason why it makes sense to focus on those in today's webinar. But before we start talking through the different ways that you can take money out of your pension, it's time for our first poll. So, please vote using Slido. The, the poll is, 'If you were to take-, thinking now about taking money out of your pension, which of these methods would you use?' So, we'll give you a second, or two to vote.

Clare Moffat: Just watching these. It's still moving around a little bit. People are saying a mix.

Sarah Pennells: Yeah, that's definitely quite popular, isn't it?

Clare Moffat: Yeah, yeah.

Sarah Pennells: Okay.

Clare Moffat: I would say just, just around about a third saying a mix of different options.

Sarah Pennells: So, what we're going to be talking about the different options in the rest of the webinar, but before we talk about those, there can be lots of different terminology, and jargon when it comes to the choices that face you at retirement. And our research also show that many people were quite confused by some of these terms. So, we're gonna start by explaining some of those those. So, the first term is, 'Tax free cash.' Now one in five of people we, we researched said they'd never heard of this phrase, and one in four said they weren't quite sure what it meant. So, let's explain it. With defined contribution pensions you can take up to 25% of your pension, or pension pots if you have more than one, as tax free cash. Now what that means is it doesn't matter how much income you have, or what your sources of income are, with the tax free cash that money is not liable to any tax.

Clare Moffat: Now, Sarah, we've had a question from Amanda, and she has asked can she take her tax free cash at any time, or does she has to-, does she have to work until she's stopped working? So, what is the answer?

Sarah Pennells: Well, it's a really good question, and there are lots of myths around taking money out of your pension. And one is that with defined contribution pensions you have to be retired before you can take any money out. Now that's not the case. You can maybe take a bit of tax free cash out while you're still working to give you some extra income, or maybe you want to fill in that, sort of, gap between working part-time and getting your state pension. So, there is that flexibility. However, there is a rule that says you have to be aged 55 or over before you can take any money out of your defined contribution pension. Now that age, that minimum age, is rising to 57 in April 2028. Having said that, there are some limited circumstances where you can take money out of your pension before you're 55. Now that's normally because a situation where you're ill, and unable to work, or if you are serious ill, and have very limited life expectancy. The other example is if you're working in the kind of profession where there's an earlier retirement age.

Okay, let's go for our second poll. A little bit of a test here. 'What do the rules say, if you want to take tax free cash out of your pension, do the rules say that you have to take this as one tax free cash lump sum, or do they let you take out several tax free cash payments?' So, please, vote. I'm saying it's a test, but there's no prize for getting the right answer, but no sitting on naughty step if you get the wrong answer. So, what's everyone saying? Okay, several lump sums. So, 61% currently saying several lump sums. So, great, you would've all got the prize. That is correct. You can take your tax free cash. You know, we often talk about it as being tax free cash lump sum, and, kind of, implies it's one wodge of money, but that's not what the rules say. You can take it as several payments. And that leads neatly onto a question from Fatah who wanted to know, 'Is it better to take tax free cash as one lump sum, or several payments?' And the answer is it depends, and I think, in particular, what you want the money for. So, you might, as I mentioned earlier on, want to use the tax free cash to give you this tax free income maybe to top-up while you're working part-time. Or perhaps you have a series of planned expenses, and in which case taking your tax free cash in stages would make sense.

If you are going to take the whole amount of tax free cash out in one go, then frankly, being, being a bit gloomy for a minute, it is worth bearing in mind that if you were to-, that-, put that money into a savings accounts, and you were to sadly die, then depending on the value of your other assets, so things like your home, and any investments you have, that money from your pension could then be liable to inheritance tax. There is something else that's also worth mentioning. Now it used to be the case that you had to take your tax free cash from your pension before your 75th birthday. Now that legal rule doesn't exist anymore, but many people do do this, and there's a whole range of reasons why they might do that. But one is that the tax rules change in terms of if you were to die when you were aged 75 or over, and leave some pension money behind, then the rules change on how much tax those people who benefit from your pension would pay if you were to die either aged 75, or over. And we did cover what happens to your pension when you die, and other issues around wills, and power of attorney, and things like that, in a webinar earlier on this year, and there's a link to that on royallondon.com.

Now, Clare, if you want to take your tax free cash as a-, out as a series of payments, is that something that all pension providers offer, and do you just fill in a form, or is it more complicated than that?

Clare Moffat: Well, as is a lot of things to do with pensions, the answer is it depends. So, most pension providers, and pension schemes, will offer this, but if it's an older type of pension scheme it might not be possible in the scheme it's in, and what would happen is that you would have to move to a newer type of pension if you want the full range of pension benefits. Now if you aren't sure the best thing to do is to talk to your adviser if you have one, or talk to your pension scheme, or pension company.

Sarah Pennells: Now before we leave the topic of tax fee cash, I've been talking about the fact there's this 25% limit, but there are a couple of exceptions here. Now it's not going to affect many people, but it could affect some, so talk us through that.

Clare Moffat: That's right, Sarah. So, you can take 25% of your pension fund as tax free cash up to a maximum of £268,275. Now to get a tax free cash lump sum of not far off £270,000-,

Sarah Pennells: A lot of money.

Clare Moffat: You'd need to have over £1 million in-, of, of a pension fund. It is a lot of money. But figures from the Office of National Statistics show that over a million people have over £1 million in pension savings. So, actually, this upper limit, well, it might affect more people than you might imagine. Now in addition to that, there are some people who will be able to take more than that £268,275 figure, and that's because they have something called tax free cash protection, and that came with some older style occupational pension contracts. And also, some people have a higher amount, and that's because of different reasons, but it-, they will have a certificate that says that they are entitled to a larger amount than that. Now you would know if one of these situations applied to you. However, for the vast majority of people, the maximum is 25% of your pension fund up to a total of £268,275. So, I think that's tax free cash, but, Sarah, what's the difference between the, the different ways that you can take money out of your pensions.

Sarah Pennells: Well, most people will take some tax free cash. And when it comes to the rest of the money there are, sort of, three options. The first is to buy annuity. The second is to go into income draw down. And the third is to take cash lump sums directly from their pension. Now before we talk about those, I think it's time to have a bit more of a jargon-buster to explain some of these terms. So, in the world of pensions A is for, well, annuity, among other things. Now annuities have been around for years, but the workplace pensions research I referred to earlier on, also showed that quite a few people either hadn't heard the term annuity, or didn't know what it meant. So, let's explain it. When you buy an annuity you effectively swap the money that's in your pension pot for an income that's guaranteed to last for the rest of your life. Now the benefit of an annuity is that you do get this guaranteed amount, and it will last for as long as you live. Now you could use your whole pension fund and buy an annuity, or you could, as I said, take out tax free cash. That's down to you.

There are some decisions that you have to make. So, you can choose to have your annuity rising in line with inflation, or a set amount, or you can also choose to have a pension that's paid to your partner, or husband, or wife, and we'll talk about that more later. I think though before we talk about the other ways you can take money out of your pension, it's worth a quick recap as to what happens to your pension contributions when you're building up money in your pension fund. So, the money that you pay in to your pension, and any contributions from your employer if you're in a workplace pension scheme, and the tax relief, well, that's gonna be invested by your pension provider on your behalf. Now normally, there'll be a range of different funds that your money can be invested in, but if you don't actively choose which fund, or funds to invest your pension money in, then it will be invested in what's called the default fund. Now the make-up of a default fund varies from one pension to another, but the idea behind a default fund is that it suits the needs of most members of the workplace pension scheme. And it will arrange-, it will invest in a wide range of assets.

So, that will include things like company shares. It will include bonds, which are simply IOUs for loans either to companies, or to the government. And it could even include things like commercial property as well. Now you don't have to keep your money invested in a default fund. You can choose to move that money to a different fund if you prefer. So, we talked a bit there about-, a bit of a, sort of, speedy recap as to what happens to your pension contributions, but, Clare, how does that link to what happens if you move your money into drawdown?

Clare Moffat: Well, drawdown, it works a little bit like you've just described your actual pension fund works, because it's actually going to be a combination of different investments. Now we mentioned that a lot of people take their tax free cash, and move the other 75% of their pension into drawdown. Now, of course, one of the benefits of drawdown is that you choose how you want to take the money out. So, you can take a regular amount out, out every money. You can take out lump sums. You don't touch it perhaps until, until you need it. The most important thing to remember is that drawdown fund has to last you for the rest of your life, unless you have other savings or investments, or you're happy to live in the state pension age if you are state pension age.

Sarah Pennells: Well, I, I tried to live on the state pension for a week last year as a challenge with some of our customers, and it was tough. So, not an option for me, I'm afraid.

Clare Moffat: Yes, and I think that's certainly really difficult. And I think that's one of the reasons that many people when they are thinking about taking their pension benefits, and certainly when they're thinking about moving into drawdown, that's when they would go and take financial advice from a financial adviser, to talk them through all of these different things. Now one thing to mention is that you can't pay money directly into your drawdown fund. So, if you've moved all of the money from your pension into your drawdown pot, and you want to pay more in, then you would have to pay that into the pension, and then move that across to drawdown again. But I think the key point is that, you know, pension money is still invested when it's in drawdown. Now it should grow, but there is absolutely no guarantee about this, and it could also fall in value, and you could end up with less in your drawdown fund than you actually moved into it in the first place. Now, as I mentioned, you, you know, you can choose how that's invested. Your adviser can help you with that. And lots of people like having that choice, and being able to pick where it is invested.

But if you don't want to choose where it's invested, or you don't feel confident doing that, then there are options called, 'Investment pathways.' Now all providers have to offer investment pathways for those people who don't want to buy a guaranteed income, an annuity, straight away. And as you can see on screen now, there are four investment pathway options. So, option one. Well, that's for people who don't plan to take their pension money for-, within the next five years. Option two. Well, that's for people who plan to buy a guaranteed income, an annuity, within the next five years. Now the idea is that this investment option maintains its buying power. Option three. Well, that's for people who plan to take income from their pension within the next five years. And option four. Well, that's for people who plan to take all of the money out of their pension within the next five years. Now you can swap from one of these investment pathway options to another, or indeed to a completely separate fund. You're not locked into this throughout your retirement, because, Sarah, things change in retirement, and what people want to do, that changes too.

Sarah Pennells: Absolutely. Now another option is to take cash lump sums directly from your pension pot, and in that case 25% of every payment will be tax free, but the other 75% will be taxable, and you have to take both those payment at the same time. Now it is important to say that you can have a mixture of the different ways of taking money out of your pension. That was reflected in the answers we had in our first poll. So, for example, you might decide that you want to go into income drawdown when you retire, say that's 55, or 65. And then when you're a bit older, when you reach 75, well, at that point you want to buy an annuity, because you want the guarantee of knowing that that income will last you for as long as you live. Or perhaps you decide you want to buy an annuity to cover the cost of your essential bills, and then the money that you have left over you'll move into drawdown.

Clare Moffat: Now-, so, Sarah, we've had a question that's related to that from Alan, and he's asked, 'Is going into drawdown better than buying an annuity?'

Sarah Pennells: I was about to ask myself a question there, but, anyway. So, I mention the situation a moment ago where, you know, you can have this mix of different ways. And let's just explore that in more detail. So, with an annuity, as I said earlier on, you hand over your pension fund in exchange for this income that's guaranteed for life, but there are some decisions that you'll be faced with as part of buying an annuity. Now one of the biggest ones is whether the payment you receive from your annuity stays at the same level throughout your retirement, or whether it increases either in line with inflation, or a set amount. Now there are pros and cons to each. If you, say, retire when you're 65, and you're taking out your annuity then. Then what might seem like a reasonable income level if you choose to have that level annuity where payments don't go up, if we're living in a time when inflation is fairly high, by the time you're 85 twenty years later that income level in real terms may not be enough to cover those essential bills that you have. But on the other hand, there's quite a lot of research that shows that for many people, not necessarily everybody, they spend less money as they progress through retirement.

So, you may be spending more money in the early years of your retirement, and then by the time you get to 85 you don't actually need to have as money to spend. Now there's a-, another decision to make if you have a partner, or husband, or wife, which is whether they get a pension from your annuity after you die. Now you could choose, for example, that they receive a fairly small percentage of the payment that you were getting, 25%, for example, or 50%. Or you might think, 'Actually, no, they have very little other income, I want them to have the same level of pension that I received while I was alive.' Now there are a whole range of factors that go into working out the cost of buying this extra payment through an annuity, but one of those is the level of pension that you choose for your husband, wife, or partner. Now the bigger the percentage the more it costs. But whether or not you have a, a partner, and whether or not you want them to have a pension, there's another decision as well, and that's about whether to buy an annuity with what's called a guarantee period. Now the terminology can be really confusing, so, you know, apologies for that.

I mentioned at the start that annuities provide a guaranteed income, or are described as providing an income that's guaranteed for life, and both of those are true. A guarantee period is something different. So, let's explain it with an example. Supposing I'm 65, I want to buy an annuity, and I buy an, an annuity with a guarantee period of ten years. And then sadly five years after I buy the annuity I die. Now with the guarantee period what that means is that the people I choose to inherit, my loved ones, would receive a payment. If I chose that same annuity with the guarantee period of ten years, and then happily I'm still alive at the end of ten years, then they wouldn't receive anything. But as we can see there are a number of important decisions that you are faced with if you want to take out an annuity. And with an annuity, once you've made that decision, you know, you get a cooling off period, but once that's elapsed that's it. You can't change your mind. So, for example, if I decided I'm going to take out an, an annuity, I don't want the income level to rise in line with inflation.

And after a few years inflation is quite high, I'm finding that my income isn't really stretching, I couldn't then change my mind a few years down the-, down the road. Now, Clare, we talked in a bit of detail now. We've gone through the tax free cash. I've just talked through some of the decisions around an annuity. What about the examples of drawdown, or cash lump sums, let's have a bit more detail on that.

Clare Moffat: So, I think it's actually worth looking at an example with this. So, we've got the example of Paul. Now Paul is 55. He is earning £45,000 a year, and he has a pension fund of £100,000. Now he wants to buy a new kitchen, £25,000, and he knows that he can take some tax free cash. He lives in England, and he's a basic rate tax payer. So, how can he get that money from his pension pot in the most tax efficient way. But I think it's time for another poll, and we're going to see what everyone thinks that Paul can take out as tax free cash, £25,000, £50,000, or £75,000.

Sarah Pennells: Let's see if everyone's been paying attention. So-,

Clare Moffat: Oh, 100%.

Sarah Pennells: Alright, so, so more prizes.

Clare Moffat: More prizes. So, that's, that's correct. £25,000 is the right answer. But back to what Paul can do. Well, he can take out a cash lump sum, in fact he could take out the full amount of £100,000, but he's going to get the £25,000 that he needs for his kitchen tax free, but as Sarah mentioned, the other 75%, well, that's going to be taxable. So, that £75,000 is going to sit on top of his salary of £45,000, which means he's going to have taxable income of £120,000. So, he is going to be paying a lot of higher rate tax. Plus, he doesn't actually need that other £75,000. So, it would be coming out of an income tax, and an inheritance tax friendly environment of his pension to potentially sit within a bank account. The other option is that he could take his 25% tax free cash, and move the other £75,000, the other 75% into drawdown. Now that's where, as we mentioned, it would be invested, it should be growing, and only when he needs it would he start taking some income. Now if Paul does that, and only takes the tax free cash, then his taxable income stays the same at £45,000.

Now if that £100,000 was made up of multiple pension pots it's the same. He can take 25% from each, and then move the other 75% into drawdown. But often, people take more than they need in tax free cash. So, what if Paul didn't need as much as the full amount of tax free cash? What if he needed £10,000 instead? Well, he could take that £10,000 of tax free cash, and move the other 75%, which would be £30,000 into drawdown. So, let's summarise that a little bit. From £100,000 he's taking £10,000. £30,000 has gone into drawdown, and there's £60,000 left in his pension pot. Now let's presume he leaves it for some time, and it increases to £65,000. Then he decides he wants to take the rest of his tax free cash. So, he'd be entitled to £16,250 of tax free cash, and £48,750 would move to drawdown. Now that's £1,250 more than if he'd moved it all into drawdown at the same time. Now that's because he can take 25% of a higher amount, because there's been growth on his fund. But it is important to remember that if his fund had decreased in value then it would be 25% of a lower amount. But there's also other choices available.

So, say Paul doesn't need a lump sum of tax free cash at all. What if he wants to reduce his working hours? Then he could actually take his tax free cash in stages. So, say he would like to take £250 of tax free cash every month. Well, £750 a month would then move into drawdown. So, there's a real flexibility there. And when Paul does want to start taking income from his drawdown fund, perhaps he's stopped working, then he can choose how much income to take. And it can be useful if, say, he wants to stay within the basic rate band, or before he receives his state pension he wants to stay under the personal allowance. So, there is a lot of flexibility around taking drawdown.

Sarah Pennells: And one of the other questions we had submitted in advance was from Rachel who said once she's taken that tax free cash from her pension, does she have to find a new home for the rest of the money that's in her pension?

Clare Moffat: Well, so that depends on, on how it's taken out. So, we mentioned that if you take a cash lump sum then you'll get the tax free element, and then you'll get the other 75%, those come together, and that will arrive in your bank account. But perhaps you've not taken all as a cash lump sum, so there'll be still money sitting in your pension fund, and it'll be invested there. And similarly, with drawdown if you only take, kind of, some tax free cash, and you move the other 75% into drawdown, then there would be some money left in your pension pot, and you'll have some money left-, some money in your drawdown pot. Now remember though that, that, you know, the money in your pension, and in your drawdown fund, well it is invested, but it is going to look after you in your retirement. So, it's really important to be aware of that, and again, you know, it can be a useful time to take advice for help on what you should be invested in. Because actually what-, you know, when you do start taking money out of your drawdown fund, what you might be invested in could be different from when you were much younger, and saving money into your pension.

Sarah Pennells: Good point there. And the other thing to, sort of, bear in mind is that-, just a couple of things to think about if you are taking money from your pension. So, if you're taking money out of your bank account then you'd probably just go to a cash machine, or maybe you'll transfer it from your app, and it'll be-, it'll be there, sort of, pretty much straight away. But if you're taking money from your pension it's a bit different, because the pension company will need to carry out some checks on you to make sure it's paying the right person for the first payment that it makes. So, if, going back to your example of Paul who's got his kitchen, you are taking money from your pension for a specific expense, then it-, you have to just make sure there's enough time for that money to come into your account before you need to pay your supplier. And we were talking earlier on, Clare, well you were mentioning how, sort of, HM Revenue and Customs will treat money that's coming out of your pension almost like salary. So, because of the amount that's taken off in tax, there could be less money going into your bank account from your pension than you expect. So, let's just explain that a bit.

Clare Moffat: So, I think this is really important, and, and it's really worth unpicking. Now as we mentioned, HMRC treat this as a salary. And what happens is that if you take a large amount of money out, HMRC are going to presume you're going to get the same amount every month. So, let's look at Paul's example again, but change the scenario a little bit. So, he hasn't taken anything from his pension, but he's stopped working. So, he decides he wants to take all of that £100,000 out of his pension. So, HMRC believe that he's going to take out £25,000 tax free, that's fine, but £75,000 they think is going to hit his bank account every month, which is a lot, a huge amount of money. It's a lot. Now anyone in this position is going to find themselves paying a lot more tax than they should initially. So, if we look at this slide on screen. Now there's a lot of numbers on this slide, but just focus on the bottom right, and the numbers in teal, or green. Now that-,

Sarah Pennells: I call it teal. You call it green.

Clare Moffat: That's what Paul would see in his bank account.

Clare Moffat: That's what Paul would see in his bank account. £67,871.13. But if we move onto the next slide, again, in the bottom right, this is what Paul should be receiving. £82,568. So, around about £15,000 of a difference. Now, in the end, Paul will receive that higher amount of money, but because of emergency rate tax, then he's going to either have to claim back that difference, that £15,000. Or he's going to have to wait on the tax system sorting itself out, which it will, and then he would get a refund. So, it's really important if you're taking large lump sums, either out as a cash lump sum or out as a large lump sum from drawdown to remember this. Especially if you have a plan for that money, because it just takes a little bit longer to get the full amount. But moving on, we've had a question from Jerry. Now, Jerry's question is, can he still pay into his pension if he's already taken money out of his pension? Now, the answer to that is yes, but some people won't be able to pay in as much as others. And that's because of something called the money purchase annual allowance. So, Sarah, can you explain about this?

Sarah Pennells: Yes. So, what the rules say is, if you take money from a defined contribution pension flexibly, so that means if you're either taking income from drawdown or you're taking cash lump sums where there's a taxable element. Then, as Claire mentioned, the, the money purchase annual allowance kicks in. So, more terminology but let's explain how this works with an example. So, the rules say that when you're building up your pension, then you can pay up to 100% of your salary into your pension and you'll still receive tax relief on your pension contributions. Now, of course, you know, most people aren't going to be tipping 100% of their salary into their pension. But that's actually what the rules let you do. However, there is something called the annual allowance, which limits how much you can pay in without facing a tax charge. So, assuming that you have the salary to support it, you can pay up to £60,000 a year into your pension without facing a tax charge. However, if you take money out of your defined contribution pension flexibly, as we just mentioned a second ago, then something called the money purchase annual allowance is activated or kicks in. And that limits the amount you can pay into your pension to £10,000 a year.

Now, that sounds like a lot of money, that's, kind of, £800 a month but there might be situations where you want to pay in more than that per year. So, let's look at an example where, you know, say you've stopped work, you've retired, and then maybe after a while you're thinking, 'Actually, I want to go back to work. I miss work.' And you want to, maybe, make up some time with your-, lost time with your pension and pay more money into your pension. Or perhaps you've stopped worked, you've retired, and then you're finding the cost of living means that you actually can't afford to retire. And our cost of living research is showing that more and more people are in that situation. So, I've mentioned the £10,000 limit and that it's £800 a month, which sounds like a lot. But that £10,000 limit includes not only your contributions, but your employer's contributions and any tax relief you get as well. Now, if you are in the situation where you are limited by the money purchase annual allowance then you will have received a letter that tells you that. So, Claire, I've talked a bit, sort of, briefly about when it does apply. But just explain when it doesn't apply.

Clare Moffat: So, it doesn't apply if you have a defined benefit pension, so, like a public sector pension, I mentioned right at the very beginning. And it doesn't apply if you have a defined contribution pension and you take your tax free cash and then decide to buy an annuity. Now, both of these situations are similar because what you actually have is a guaranteed income, and it's fixed, and there's no flexibility with what you can do with it. Now, it also doesn't apply if you only take your tax free cash and move the rest into drawdown and you don't take any money from drawdown. Perhaps because you're still working. And it also doesn't apply if you take up to three small pensions of less than £10,000 each.

Sarah Pennells: And, we've covered a bit about when it applies, but just recap on then when it does apply.

Clare Moffat: Okay, so it does apply if you move your pension pot into drawdown and you start taking even £1 of income. Or you take any amount of one of those cash lump sums. So, I think that's covered quite a lot. We've got one last area that we want to cover briefly, and this is about accessing pensions before the age of, of 55. Now, Sarah, you did mention this briefly at the beginning, but we had a question from Mira. Now, she says, well, she has two defined contribution pensions, but she's sadly been diagnosed with cancer. She's stopped work and because of the prognosis, she's unlikely to work again. Now, she's 51. So, if you're under 55, there are two different scenarios in which you can take out money when there's ill health. So, firstly, in cases of serious ill health, well, that's where sadly someone has been given less than twelve months to live. Now, they can take all of their pension out as a tax free lump sum. Now, that's not always going to be the best idea because, especially if it's a very large pension, then if they don't spend all of that money and there's still a lot left when they, they do pass away. Then this could be sitting in a bank account, and if they have a lot of other assets, then inheritance tax could be a problem there.

But, lots of people don't know about this, and accessing that money could be really helpful for someone in the last year of their life. Now, the other-, the other, kind of, area in terms of ill health is something called ill health retirement. Now, that's when you can access your pension early because of poor health. Now, it's known as medical retirement or retirement on medical grounds as well. Now, in this case, the normal age in which you can access pensions doesn't apply. So that age 55 doesn't apply. Now, if you qualify for ill health, then you can normally have the same options that you would do if you were 55 or over. If you find yourself in either of these two situations, then you'll need to provide supporting medical evidence to be able to take your pension early. Now, it's really important that you talk to your advisor if you have one, or your pension scheme or pension provider. Because they'll really help you through this process. And also, for more information, look on the government backed and independent website, MoneyHelper.

Sarah Pennells: Well, we've covered quite a lot, I think, in the last, well, 35 minutes or so. So, it's time to go to some of your questions. So, Claire, let's, let's, let's have a look at some of the questions that have come in.

Clare Moffat: Yep, so, I think sitting at the top of the charts is, from Tony, 'If you have more than one pension, can you drawdown 25% of each?'

Sarah Pennells: So, what's the answer then?

Clare Moffat: So, yes. So, if you had four pensions of £10,000 each, you could take £2,500 from each of those four pensions and you could move the other 75%, the other £7,500 into drawdown. So, it doesn't matter how many different pensions you have, you are entitled to that up to that maximum of £268,275. But, it, it doesn't matter in the number of pots that you have.

Sarah Pennells: Great stuff. Well, good to get an answer to that. So, we've got a question from Roy and he says, 'Is there a difference between drawdown and crystallisation or are they the same thing?'

Clare Moffat: Oh, so, in the pension world we love a technical term. And crystallisation is just-, and that's, that is changing a bit next year but we'll not get into some of that. But-,

Sarah Pennells: Let's not get too head-melty.

Clare Moffat: But crystallising is, is basically when you're doing something actively. So, that was-, you could be crystallising by moving into drawdown, you could be crystallising by buying annuity. It was when you were actively doing something, so you were taking some tax free cash and then you were doing something with that other amount of money. So, not, it's, kind of, part of the same thing. But it just was when you were actively doing something, so when we spoke about the options of drawdown, annuity and cash lump sums, that's effectively you are doing something and you are moving from your pension pot into something else.

Sarah Pennells: Okay. So we've had a question from Andrea who says, and I think this is a really interesting one. It's one I think we get in every, every webinar we do, which is, 'How do I know if I'm paying enough contributions? How to decide how much to pay into her pension?' And we've covered this in-, we covered this in a webinar we did in March, which was how to get the most from your pension. And I think we've covered it in, in probably, sort of, most of the webinars. And it's one of those things where you, kind of, want to give a really simple answer and say, you know, this percent. And there are some figures that various people, sort of, use as a guideline. One of the things I think that we've found quite helpful in terms of explaining how to think about how much to pay into your pension is, is, sort of, to work backwards, in a way. To look at what you might need to live on when you retire. So, as I said, we do have all the webinars on our-, on our Royal London dot com website. So you can have a look, search under webinars, and we've got links to them.

There is a, an organisation or website called Retirement Living Standards, the website address is Retirement Living Standards dot org dot UK. And what that does is show you how much different lifestyles in retirement will cost you. Now, it's based on independent research and it's been commissioned by the Pensions and Long-Term Savings Association. And that will show you how much a minimum standard of income in retirement might get you. And it's, kind of, maybe, the odd weekend away or holidays in the UK and not being able to run a car, for example. How much a comfortable, standard living retirement would get you and that's, kind of, holidays abroad, being able to renew your car, have a new kitchen, all those kind of things. And then, sort of, the moderate, the in-between. It is actually a really good starting point, and I think the other thing, and I'll let you come in in a minute, Claire, but I think the other thing, maybe to think about is, is, finding out how much you're gonna get from the state pension. And we've got a state pension hub on, on our website on Royal London dot com which tells you how to get a state pension forecast.

And, again, we did some research on state pensions early on this year and we found that quite a few people hadn't got their state pension forecasts. Now, this will tell you how much state pension you're entitled to receive, or you're on track to get. And I think knowing how much you're gonna get from the state pension and, crucially, because the state pension age has been rising, knowing when you're going to get it. That's, it's, kind of, like, the key part of the jigsaw, really, isn't it? If you're trying to work out how much you need to get in retirement. Then you need to think, 'Okay, I'm gonna get this much from the state, this is when I'm gonna get the state pension, looking at the Retirement Living Standards website, actually, that's how much I want to live on.' And then start thinking what the gap is. And, there are some calculators. The MoneyHelper website we've, which you mentioned earlier on. Pension providers often have calculators to help you workout what you're on track to get.

Clare Moffat: Yep. And I think all of those points are great. But often it can be that, you know, your pension provider will probably have an app, that might be able to give you some indication of how much, you know, it will say how much you're paying in. It might give an idea of what that would buy at, kind of, the retirement age that you've put in. So, all of these things together, but it does feel like it is the, kind of, million dollar question, doesn't it?

Sarah Pennells: And I think it's one of those things, you know, we're in a cost of living crisis and we keep talking about this. And it's not about, you know, being tone deaf and saying, you know, 'You should be all paying so much money into your pension.' But I think, in a way, from, sort of, conversations that I've been having, one of the things I think the cost of living crisis has brought into very sharp relief is, actually, what it's like living on a limited budget. Or what it's like when your costs are increasing. And although, you know, prioritising today's bills makes a lot of sense. But actually it's also important about, kind of, not losing sight of the fact that when you stop work, whenever that is and whatever your situation is, then you are going to have to live on what the state provides by way of a state pension. And other pensions, whether that's workplace or private pensions as well.

Clare Moffat: So, we've got another question from Jonathan. He says, 'Having taken out a sum of money from my pension a few years back, I'm still investing an amount every month. How does this affect the 25% tax free sum?' So-,

Sarah Pennells: Do you want to kick off with that?

Clare Moffat: Yeah, so that, well, there's probably two different parts to this question. So, it's a bit like the scenario of Paul, where he's taken some money out of his pension and he's moved some into drawdown and he's taken some tax free cash. So, you would still have an entitlement to tax free cash from that amount that's still in your pension pot. So, say that you had, kind of, saved another £10,000 into your pension pot, then you could take another 25% of that, so £2,500 from that. So, any money that's, kind of, in your pension pot and hasn't moved into buying an annuity, been taken as a cash lump sum or moved into drawdown, then you'll have that 25% up to that maximum of £268,275. And, and also, just, you know, I'm sure this is something that Jonathan's aware of, but, I'll remind you about that money purchase annual allowance. About the maximum that after you've taken some money out, if you've taken any income from drawdown then you would be restricted by that. If you haven't, and all you've done is take your tax free cash, then you wouldn't be restricted. So, yeah.

Sarah Pennells: Great stuff. I'm going to jump around a bit, because we had a question from Yvonne which repeats an earlier question. But I think it's just worth repeating the answer, because I think it does cause a lot of confusion. So, Yvonne says, 'If I have two pensions, can I take 25% tax free cash, in brackets, from each one?' And, as you mentioned earlier Claire, the answer-, the answer is yes. So, you're not limited if you've got more than one pension, it doesn't mean you can only take that tax free cash from one pension. Okay. Time to go onto another question. Now, this is from Shaun. And I think this is a really good question as well, so it says, 'How easy and how quick is it to set up a monthly income from a pension?' Now, I don't know whether he's referring to buying an annuity or taking a monthly income from drawdown. So shall we-, shall we go with the drawdown bit first?

Clare Moffat: Yes. So, I think it's-, you have-, you have different options. You know, so you don't-, just because you've saved your money with, kind of, one company, it doesn't mean automatically you have to go into drawdown with that company. You could take financial advice and do, you know, maybe choose something differently. But it's a, kind of, administrative process. Sarah, you mentioned that, you know, especially if you are potentially moving companies then there's, kind of, regulatory responsibilities including checking for scams and things like that. To make sure that your money is going somewhere that's, like, a recognised company, for example. So, it's not as quick as, as you mentioned, as, kind of, taking money out. Especially when you are doing it for the first time as just, kind of, you know, it's happening today. But, you know, it should be, kind of, have to go through the right regulatory processes, but it shouldn't be something that, you know, takes months and months. You know, it should happen quite quickly.

If you're in a defined benefit pension, then sometimes you have to give them more notice. It can take a bit longer, especially some of the public sector schemes. So, you know, bear that in mind as well. So there's, kind of, different processes that have to be gone through in different places.

Sarah Pennells: Okay. Well, we're getting lots of questions coming in, which is great. So, I'm gonna go to this question from Jeanette who says, 'If you take your pension but want to continue paying into a pension fund, I've heard about a £4,000 limit that you can pay tax free. Is this correct?' So, I'll leap in here. Jeanette, you're right to, kind of, raise this. So, this is what I was talking about earlier on, the money purchase annual allowance. And this applies, just to, kind of, give a recap, if you take money flexibly from your defined contribution pension. So, it doesn't kick in if you just take the tax free cash lump sum and it doesn't kick in if you move your money to income drawdown but don't take any income from it. Now, the money purchase annual allowance, which is the amount that you can then pay into a pension without paying a tax charge used to be £4,000. But that was increased in the budget in March to £10,000. So, you're right that you are affected by a different limit but it's not £4,000 anymore, it increased in the budget in March to £10,000.

Clare Moffat: So, another question from William. So he says, 'I'm 66 and still working. What percentage can I take as tax free lump sum and what happens to the remainder and any additional contributions from me and my employer?' So, it's still 25% unless, you know, you are going to be caught by that £268,275. So, it's still 25%. And your employer contributions will still be going in, so that's all still going into your pension fund. And then, you know, that's, it's just the same. You can take your 25%, you can move it to drawdown and then if you're still working that's probably-, you know, that's maybe a better idea because you don't need to be taking any income from that right now because you'd just end up paying more tax on it. And, yeah. I mean, probably one thing to mention is that the tax relief on pension contributions, you don't get any tax relief after the age of 75. So, you know, if people are still working, kind of, older, then that would normally be, kind of, when they're-, you know, you're not getting the tax relief on pension contributions. So, but we don't find that many people are. People are working longer, but not normally as long as that.

Sarah Pennells: Yep. Okay. A couple more questions to rattle through. So, we've had one from Tim and he said, 'What happens if you have several different pots with different providers?' Sorry, wrong question. It's a question from Roger. 'Is the £268,000 limit on taking out tax free cash per pension that you have or cumulative over them all?'

Clare Moffat: I think people who have a lot of money in pensions would like it to be individually, but unfortunately it's not. So it's cumulative. So, that is £268,275 for all tax free cash that you would take in your lifetime. So, that is, kind of, the test.

Sarah Pennells: And I started reading out Tim's question. Apologies Tim, the reason I stopped is it's the repeat of the question we had with Yvonne earlier on. So, if you have several different pension pots, is it 25% tax free per pot? And the answer is yes. And, you know, obviously really good to keep repeating this. Because it is, I think, something people get quite confused by. So, a question from Pamela saying, 'How are you taxed on your pension when you're no longer working?' And I think, just to kick this off with one thought, which is, now I don't know whether someone's no longer working and is under state pension age. So, they're under 66, the current state pension age, or whether they're no longer working and are over state pension age. But many people don't realise that the state pension itself is taxable, but it's paid in a slightly different way. So, just explain that, Claire.

Clare Moffat: Yep. So, let's think about someone under state pension first of all. So, if you're under state pension, perhaps you're taking-, say your pension is providing £10,000 a year. So, that would be under your personal allowance so you'd not be paying any tax on that because it's under the personal allowance.

Sarah Pennells: So just remind us of the personal allowance.

Clare Moffat: So, the personal allowance is £12,570. But, what'll often happen is then, so people have been used to not paying any tax, for example on that private pension or workplace pension that they've started to take. Then they reach state pension age, and state pension comes in, and as you mentioned, it's, it's paid tax free. But it still sits in your, kind of, tax stack. So you've got the state pension of that, kind of, amount, which is just, you know, remind me of the amount, Sarah?

Sarah Pennells: £10,836.

Clare Moffat: So you've got that and then you would be paying-, you would only have a small amount of your £12,570 which would be tax free of your private pension that you were receiving tax free before. Because that's just going to sit on top. So you will end up paying tax after that point. So it really, kind of, depends if it's before state pension age, or often what happens is people reach state pension age and then the tax will be taken off their private pension not their state pension. You will get the state pension, that, kind of, comes first, then you're private pension is going to sit on top of that. And that's where tax will be paid. And pension providers just operate in the same way that an employer would be. They get a tax code, they apply the tax code, that's what happens. So, it's not as if they've suddenly decided just to take more money off you. It's because that's, you know, the system that we have.

Sarah Pennells: Okay. So, we've got a question here from Ozazua. So, which is, 'Is the 25% tax free cash that you can take out of a defined contribution pension, is that based on the balance once you're age 55 or at the time you start taking money out?'

Clare Moffat: So, it's at, at the point that you take money out. So you might not touch your pension at all so, and some people don't. Some people are still working or some people have other investments and, you know, pensions are in a very tax friendly environment so often people leave those. So, if you, say you are 70 and you decide that, 'Now I'm going to take my pension.' It's that value at that point in time, it's that 25% of that total value that's the, the amount that's important. And as we worked out in the example with Paul, you can take some out then, you know, build up some more in your pension and then it's 25% of the higher amount as well, so.

Sarah Pennells: Okay. So, I think we'll take a couple more questions. So, we've got one from Claire who says, 'Can I take all-,'

Clare Moffat: Good name.

Sarah Pennells: 'All of my pension.'

Clare Moffat: Strong.

Sarah Pennells: Yeah, not enough Claire's around. 'Can I take all of my pension as a lump sum?' She says, 'I'm 56 years old.' She said, 'I stopped working last year and haven't contributed since then.' And I think-, I think this is, again, it's quite a common question. And sometimes people feel like they don't quite have control of their money unless they have it in a bank account or a savings account. But, pros and cons. Why might that be maybe not a good idea or why might it be a good idea?

Clare Moffat: So, I think it depends on the amount that's in the pension sometimes as well. So it's working out that. If you had half a million pounds in a pension, for example, then it would be a very bad move taking out from somewhere where it is in a-, in a tax friendly environment. You might have £10,000 in a pension and, actually, you really need that money or you want to do something so it's worth taking it out. But the problem is, if you take out one of the, you know, if you take out, say it's £100,000 like in the example with Paul. Then you're going to end up, you know, paying, even if you aren't working, you're going to be paying a lot of tax on that. Because that taxable section of it is going to use your personal allowance up, it's going to use your basic rate band up, and it's going to be using a lot of the higher rate band as well. So, if you do need the money, then even structuring it over two tax years works better from a tax point of view. But it really depends on the amount.

But Sarah, as you mentioned, people do almost feel that they, kind of, want to have more of a control than they do. But, you do have control over, over, kind of, your pension pot and your drawdown fund. And it's certainly, you know, we spoke about it in the session where we talked about what happens to your pension when you die. If you die and you've got money left in your pension then it would go to your beneficiaries and things. So, but there are reasons why people want to take the money out of their pension. And, you know, we see people maybe to pay off debts, perhaps to pay off mortgages, things like that. But just be aware, depending on the amount, even if you don't have any other taxable income, you will pay basic rate and potentially higher rate tax on, on that as well. Because it just works on the total in a year.

Sarah Pennells: Okay. So, I think we'll just take one last question, which is from Timothy. And he says, can you just, sort of, explain drawdowns? So, you, obviously, you've talked it through, you've given an example. But just, sort of, sum up what, what are the key attributes, if you like, about drawdown compared to an annuity or taking cash lump sums?

Clare Moffat: So, it's, I suppose the, the key thing, the key difference is there's a flexibility in it. So it's still invested, we, kind of, explained it, it's a bit like your pension pot. It can be invested in thousands of different investments. When you're in drawdown, so you've moved all of your money into drawdown though, you would want to be thinking and, and probably talking over with an advisor things like risks. So, you know, you don't want to be in really high risk things if you're taking money out of that fund because, you know, you can-, it's that, kind of, 'Well, what would happen if you lost more money because high risk?' Although the returns could be really good, actually, you could-, you could lose money as well. So, it's-, I always just think of it as, kind of, two pots. So one's a pension pot, one's a drawdown pot. They could have the same mix of investments in them, but it's what you choose for them to be in. So it's just, kind of, a variety of different funds. And it's just a means, you can take out money in different ways. You can take out, if you had £100,000 in drawdown you could take £50,000 one day and then take out £100 a month after that. Or you could just structure it to take out £10,000 a year, for example. But you can change it.

So, I think that's the important difference with drawdown. It's there's a flexibility. You mentioned with an annuity, once you've bought an annuity that's it. If you don't have a guarantee period and you die, then there's, you know, there's, kind of, nothing. Whereas with drawdown, whatever's left in that pot will go to your beneficiaries. And a cash lump sum, well it's just, kind of, coming out of that pension pot. So, again, the difference is, is it's, kind of, coming out of somewhere where it's invested, you're going to get some tax free cash. But you're going to get that other amount of cash into your bank account that's taxed. So, I think that's the main difference. But, there's similarities to, kind of, how it sits in your pension. It's, it's just sitting in a pot, essentially, in different investments which you would choose or your advisor would help choose or you would use one of the investment pathways.

Sarah Pennells: Yep. I think-, I think that really sums it well, Claire, this idea that, you know, you do have much more flexibility than if you were to, for example, buy annuity. But the flip side of that is, it's your responsibility or, you know, obviously if you're working, if you're using an advisor, you have to make sure that that money lasts for your life. So you have to make decisions about where it's invested and also how much money to take out, not only from a tax point of view, but also from a, sort of, income sustainability point of view. As in, making sure you don't take out too much money early on so then, in your later years of retirement, you don't actually have any money to fall back on, so.

Clare Moffat: And I think that, that is really important. Because we know that, I think, you know, there's a lot of children being born today that are going to be predicted to live until they're 100. People are living much longer and so if you want to have enough money in retirement, you've got to manage that, that pot of money. And that's why I do think taking advice at that point in time is good. Because an advisor will help you to understand the risk, but also making sure that money lasts.

Sarah Pennells: Great stuff. Well, yeah.

Clare Moffat: Well, yeah.

Sarah Pennells: Don't think we've got time to answer any more of your questions, but before we go, we do have one last poll, which is, we're going to be covering in our next webinar, which is the first one of 2024. We're going to be talking about tax year end, but what we'd like to know is what other webinars would you like us to put on in 2024? So, please vote using the Slido link.

Clare Moffat: Okay, so.

Sarah Pennells: Wow, that's a.

Clare Moffat: 71% of people are saying finding a financial advisor so, yes.

Sarah Pennells: That's what we'll cover then.

Clare Moffat: We'll be looking at that for 2024. So I think that just leaves us to say, well, thank you very much for listening today. We're going to be sharing a link of the recording and yeah, thank you for joining us.

Sarah Pennells: Thanks very much, bye.

On 11 September 2023 our investments expert Ryan Medlock joined the Pension Awareness team for a live session on where your pension money goes and how it's invested.

Useful links

Hello and welcome to our show today on How Is My Pension Invested? Now, this is gonna be an exciting one. Really, really looking forward to this, to talk about this subject.

I'm joined by Paul from Nest. How are you?

I'm great. Great to be here.

Great to be here too. Ryan, where are you from?

I should have let you said your name, but anyway, Ryan, where are you from? Uh,

I'm from Royal London. Royal London. Royal London. And we've got the logos there, so you may recognise, um, the companies. So before we get into this, I wanted to say a big shout out to our partner this year.

Pay Your Pension some attention. It kicks off next week, a big, big campaign for around three months. Um, and that is for everybody to get involved in, and hopefully you'll find out more about your pension and you'll pay more attention to it. So look out for that coming soon.

So let's get to it. Well, my name's Johnny, and I've introduced myself.

My name's Johnny. I'm from Pension Geeks, the Pension Awareness Campaign.

This week we've got 15 shows coming to you. We're celebrating 10 years, 10 years of helping people with pension awareness. Pretty good.

That's why we've got the nice balloons. Very good. Um, but yeah, let's get straight into it. Let's get straight into it. So today, how is my pension invested? Looking forward to it. Okay.

Should we get started? James, do you wanna put the first graphic up? Paul, are you taking us away? Yeah,

So I, I'm gonna start off talking a little bit about, um, investment in, in general terms, and then we're, we're gonna hand over and go into a bit more detail. Okay. So the, the first thing to say is, you know, um, I'm, I'm from Nest.

We've got millions and millions of members, 12 million members, all of this money's coming in, and we've got choices about where that money goes. Okay. And traditionally, when people are saving for things, uh, they'd stick, they're stick it in the bank, or they might keep it in a jar. Um, um, what, what we want to talk about today is that's probably not great, uh, in terms of long-term saving.

Not shoving your money under the mattress. Not under the mattress, and the amount of money that people can build up over a savings career, your mattress is gonna be pretty, pretty bumpy. Okay?

So what we wanna do is put people's money to work so we can grow it much, much faster than you'd get in a savings account.

So we want to kind of stick it in companies, we wanna stick it in, um, buildings and, um, all sorts of kind of different projects, all with the aim of growing that money as fast as possible so people can get much higher incomes in retirement than if you just stuck it in a bank.

Nothing wrong with banks. Yep. For the short term, if you wanna access your money and you want it to be safe in the short term, great things to put your money in. But for long term savings, for, for pensions, investing’s the way forward, investments the way forward. Mm-hmm. Ryan, over to you.

So tell us where you are. You are, you are from then.

I'm, I'm from Royal London. Yeah. So I'm a senior investment development manager. Manager, yeah. At, at Royal London. Uh, probably the most meaningless title in the whole industry. You said that. I think it's a cool title. Well, I think it's a cool title. It can do. I mean, it's a title. It's, it's, it's a cool role.

So my role basically involves speaking to lots of different people across the industry. Yeah. So I get to speak to, uh, individuals like yourself, which is great. Yeah. Uh, financial advisers, uh, members, regulators. So that's all really, really good stuff. Yeah.


And I also get to have an input into the design of our pension investments as well. So very, very varied. And for me, I want a person like you and Paul doing that if you're actually speaking to people and know what people want and kind of got you ear to the ground room.

Absolutely. Absolutely. Very good.

Really good. Okay. Um, James, let's go to the next graphic.

The next slide. Okay.

We saw this slide before we came on air, and it scared me. It scared me. So, Ryan, take us away. What is this slide all about?

Okay, so this is, this is the investment patchwork quilt.

So everyone's got a patchwork quilt at home, and it, I can see where you got the name from. Uh, Is indeed. Says it. It doesn't, yeah.

And so investment patchwork quilt. So very, very basic.

What this is showing you is the last seven calendar years. Okay. Okay.

Last seven calendar years.

And what we're doing is we're ranking different investment types in order of performance. So the percentage number is the percentage return for each number.

Yes. Okay. Now each colour resembles a specific investment.

So these are all the different types of investments mm-hmm.

That you can invest in. So to give you a few examples, the orange box that's commodities, uh, the purple box, multi-asset.

So that is a blend of all of these different investments and, you know, if you are invested in the default investment solution. Yeah.

I, I'm, I'm, yeah. Exactly. Interested in that.

So that is representative of the journey you'll have had over the last seven calendar years. The, the, the purple box there. Now, whenever I talk through this quilt to people, there's, I always say there's two points that you can immediately draw just by glancing very, very quickly without reading the numbers.

The first one is that it looks truly horrific. Yeah. Uh, you know, it looks like one of my kids has swallowed some crayons and vomited everywhere.

Yeah. Um, but secondly, it really hammer on this point that it is very, very hard to pick a winner when it comes to investments, because you look at some of those investments and they're up and down like a, like a violent yo-yo all over the place. I can see that. I can see one, what was at the bottom is nearly at the top.

Exactly. Exactly. So, you know, you look at the purple, you look at multi-asset that is representative of the default fund's performance.

And I think the only thing you can see with certainty of looking at that is the consistency of that, you know, in terms of its ranking relative to other types of investments. Yeah. And, and that's not by any coincidence, because default funds and their very nature, they're very deliberate in their design. Okay. And, and I think one of the biggest tips that I would give to everyone watching today, you know, myself and Paul, we work in investments, we're consumed by noise all the time in investments. Mm-hmm.

My biggest tip would be ignore that short term noise. Yeah.

If you are invested in the default, trust the process and, you know, stay diversified, not having your eggs all in one basket. We've heard that phrase before. I've heard that one.

Absolutely. Absolutely. And that should deliver good outcomes. So we're seeing here, this, this purple solid, dark purple line. Um, well that is pretty much a line, isn't it? It's not powerful line yet. Is that, is that representing then the, the default, um, investments?

Absolutely. So as I said, you know, the, the, the multi-asset that is, that is a blend of all of those different types of investments. So obviously, you know, that's great people watching this, what may have come out the default.

They may have be self-selecting investments, which is fine if you've got the risk appetite to do that.

But for the majority of individuals, this will ensure more consistency over the long term.

Great. And maybe, uh, later on, um, we have got a chat function next to, uh, this video now where you can put, um, notes in the chat. But if you've got any questions, um, about investments pinging them, I said this since that pinging them over because Paul and Ryan will help in about 10, 15 minutes answer them. But that's really cool. That's really cool.

Um, she'll get to the next slide. Yes, indeed. Okay, James, next slide. Right.

I like this slide before you brought this slide up earlier and we're having to dress your rehearsal two favourite brands. I love Greg's and I love Disney.

Tell me more. Tell me more what I'm intrigued.

Okay. So I guess just before going into this, it's, it's worth pointing out, you know, Paul was talking about earlier about pensions not being, um, invested in a, a bank account. Yeah.

We actually did some research recently at Royal London. We, we spoke to 6,000 UK adults, and we found that one in 10 actually thought their pension was invested in a, in a bank account. Yeah.

That actually increases to 25% when you look specifically at that 18 to 24 age cohort. So I think all of us in the industry have, have, have got quite a job to do, I think, in terms of engaging the public.

I agree and educating agree.

And I think that's why these sessions this week I think are really good at doing that. Yeah, I agree. Uh, but in terms of this, obviously we, we've, we've just looked at that investment quilt, we've looked at some of the investments mm-hmm.

The different types of investments that, that go into that default and how they perform individually. Yeah. Um, you'll have seen some, some, um, tiles on that quilt specifically in relation to equities or stocks. I did,as we call 'em. I did. Absolutely. So you've got UK stocks, you've got overseas stocks, you've got emerging market stocks. Yeah.

It all sounds very, very scary. It does. I'm not gonna lie, it does sound scary, but

When you break it down, it's not because basically what equities or stocks are, is we're basically using pension money to purchase shares in companies on the stock market. And these are companies that everyone will recognize, you know, spanning a variety of different sectors. Okay.

So, so basically my pension, I love Disney, so I own a bit of Disney. Then with, with my pension, obviously

It depends where your pension is and obviously the, the companies will vary, but yeah. Very broad spread of companies.

It could do. It could, it could do. It could do.

Absolutely. And I was saying earlier, I love Greggs. So basically I'm doing this all a favour when I'm eating my sausage rolls, because yeah. Making everyone's family stronger. So with, with equities, you know, we generally categorise these as growth investments. So over the long term, these should ensure, uh, pretty good growth. Yeah.

But obviously with that it becomes a higher level of risk, so okay. What it generally means is the younger you are, so the further you away from retirement. Yeah.

The more exposure you'll have to these investments. Ah, okay. And, and we talked a little bit before about diversification yeah.

And not putting all your eggs in, in one basket. Yeah. I think with a lot of the default funds, nest, for example, when we give our members exposure to, uh, shares and companies, there's over 2,000 companies around the globe that, that we're investing in.

Yeah. So you, you, you're not necessarily gonna know which company's gonna be most successful for the next five, 10 years. Of course. Yeah.

But if you spread it out and invest in all sorts of different sectors of the economy and in different companies, even when some companies are doing kinda less well, you'll be invested in other companies that are doing really, really well.

So that idea of kind of default funds with well diversified, um, whether it's asset class or whether it's individually within asset classes, is really, really important to try and kind of deal with some of the ups and downs that you'll see over a long savings career. Mm-hmm.

Wow. Wow. Really interesting. Really interesting and exciting.

That to me makes pensions exciting, learning about that. Oh, absolutely. Yeah.

Rarely does. Okay, James, let's go to the next slide.

So we, we, we talked a little bit about companies. Yeah. And then increasingly what we are doing at Nest, um, because we we're, we're pretty big. Now we've got over 12 million members in the, in the UK. Wow. We're investing over £30 billion, and that's increasing by billions and billions.

30 billion, yeah.

Every year. Um, and that's grown massively since we started in, in 2010.

So we've started putting more and more money into kinda big projects like this kinda wind farm. So this wind farm, it's something that our members owe, and it's, it's off the coast of Lincoln Lincolnshire. It's not that far from, from here.

Well, I was gonna say, where the studio's based in Grimsby today. So this, this touches my heart when you were telling me, you know, not only are we invested in pensions, our pensions is like Disney and Greggs, but also locally to me. Yeah.

And, and, and this is great, this is a really good example of, of the sort of, um, some of the innovative things you can do once you start getting scale and getting lots of people bringing their money, money together. Yeah. So, so this, this wind farm is gonna generate loads of money for, for people's retirement.

Mm-hmm. But it's also supporting that essential transition from a world in which we, we generate electricity. Yeah.

From coal and gas to one where you're doing it from, um, renewables and, and, and clean, clean tech.

So we are getting our members kind of exposure to yeah. You know, the future in terms of how energy is kind of made. It's creating jobs locally.

Oh. A couple of my mates are working, doing, I dunno exactly what, but they've got jobs because of this.

It's huge. We, we, we took some of our members who, who are based in Grimsby, we took them out to, to see this wind farm so they can see their kind of like, their money in action's. Cool, cool. So, you know, not only are they generating, you know, cleaner electricity, it's also generating, um, income for them in retirement. Um, it's generating kind of, uh, more investment into local communities.

These are all kind of win-win for our membership.

That for me, when I'm thinking I'm putting money in my pension each month, it makes it even more exciting. Not only am I helping, you know, the area that I live in, grow and flourish, but also investing in technology and things like this that's gonna make the world hopefully a better place. And bring down energy bills as well. Yeah. All, all, all good stuff.

Even bringing that, yeah. You mentioned the thing, bringing bills down is good too. Yeah. Bring real down bills down is good too. Okay. Should we go to the next slide?

Yes, let's do that. Let's do that. Cool. Oh, very good. This is a very colourful slide,

So nice bit of a segue there. Um, what I want to talk about now is, is getting into the world of responsible investing. And, and I think the, the first point to make is that there are loads of different terms that have been branded around at the moment. And, you know, even the experts can't agree on what term to use in a lot of, a lot of instances. So what hope have we got? But that, that is nice,

Wouldn't it? Wouldn't the pensions industry?

It wouldn't if you couldn't make it complicated, wouldn't it? It wouldn't, it wouldn't. So, you know, people watching this video today, you know, you might have heard of ethical, you might have heard of ESG, you might have heard of sustainable and might heard of impact.

There's so many different terms out there. Yeah. Uh, but what I wanted to do is just, is just focus on the two terms you can see there. Um, ethical and ESG has actually become a bit of a catch for all term. Okay.

So we'll explore that in a moment. But if we think about ethical first, um, ethical funds or ethical investments, these are generally focused on excluding or screening out specific companies or specific sectors. So for example, uh, it might be funds that don't have any investment in companies involved in tobacco production, um, alcohol production, animal testing, etc, etc. Yeah. Um, ESG on the other hand, um, I mentioned that's become a bit of a catch for all term. Uh, it stands for environmental, social and governance. Okay. Now, in an investment perspective. So when we talk about ESG investing, what we're effectively doing is we're taking different environmental, social and governance considerations into account when we're making investment decisions. Oh, okay. So if you think about environmental, you know, that would be looking perhaps at a company's policies in relation to how it's tackling climate change mm-hmm. Waste management policies. Mm-hmm.

From a social perspective, it would be looking at the company's record on, on gender diversity Yeah. Labour rights. Yeah. And from a governance perspective, it's looking at things like boardroom diversity or how much executives are being paid, those type of things.

So it's been really proactive looking at those considerations and actually taking them into account when we make the investment decisions.

I like it. So going from, I was originally talking about our pensions being invested in like Disney and Greggs, then we're seeing, you know, we're actually doing good with it by off the coast of Grimsby, but then even have the power that we can change the way these companies are doing business and what they're doing. And we want to change.

If we're investing in them, we don't agree with them. We're moving our, our pension as where it's very powerful for.

Absolutely. Absolutely. And I think, you know, the next slide is, is on responsible investing. And you, you know, that again, has become a bit of a catch for all term, but when we talk about responsible investing, what we're generally meaning is taking ESG considerations into account within those investment decisions, as we've talked about. But also building on that point that Paul discussed earlier, in terms of, um, taking out active ownership seriously. Yeah. So things like, you know, the companies that we are invest in making sure that we vote at the AGM, we're changing decision changing decisions. Exactly. Making sure that we speak to the companies, engage with the companies, and try and influence positive change. That is a big, big thing.

And we can do this just by pensions. It's crazy. Absolutely. It's crazy. Okay.

Paul, we've got our last slide. Yeah. Take us away. So I was just gonna talk a little bit about what, what responsible investment means. Okay. Um, for Nest. And, and I think just building on those points, um, this is not about, you know, being moral or being ethical. Yeah.

This is all about better investment decisions to make more money for our members over the longer term. Of course. And I think the, the kind of key thing is our investment horizon.

So when we're thinking about long term, you know,

the markets often think one or two years in advance. Yeah. Our youngest members 16, you know, so we are thinking about an investment journey over the next 50 years.

So we can take these long-term views and think hard about how companies are gonna be successful over the long.

We're not telling companies how they should be running their business, but we are wanting to promote best practice. We want to talk about things like, um, fair pay or people being paid well, that's beneficial for our members.

It's beneficial for, for communities as well. But most importantly, this is about, um, a long-term, uh, sustainable in investment returns.

Wow. And one last point I'd make on this is, uh, we, we do have an ethical fund choice away from our default strategy.

And we talked earlier that defaults are horrible word.

It sounds really negative. Yeah. To us, the default fund is, you know,

it's a place where we're focusing all of our attention at Nest.

It's where most of our members are.

It's where we've got the most kind of economies of scale, and we can do the best job. Responsible investment is central to, to what we're trying to do, really for, for our members.

This is not something niche. Um, and increasingly we want to engage with our membership and hear about what they care about. Um, because that's a really, really powerful, when we go and talk to the CEOs or the chairs of these big companies we were talking about before, being able to say, well, you know, 12 million members, this is what they think about you. You, you should, you should take this seriously. These are your owners. Yeah. Um, it's not, you know, some abstract concept of who's owning the, it's, you know, UK workers are owning these companies.

Those companies should be operating in their interest, not, not somebody else's. I think that's the biggest thing for me.

The fact that responsible investment is standard within default solutions.

So for members, it's not a case that they're having to make active decisions and, you know, try and root out specific fund choices. And it's been done in the way, which isn't detrimental to financial return, risk, or cost.

So that is a huge plus.

So before this show started today, I, like I said, I'm in a default fund.

I thought I wouldn't be getting all 'em great things that you've spoke about today, being in a default fund. Well, you learn a lot, don't you? Absolute.

I know.

It's great. We need, we need better words though. Default is a, I know.

Let's change default. If we can do anything today, let's change the word from the default fund. Yeah. Okay. Well, we're gonna get your questions, um, to both Paul and Ryan in a moment.

But before we do, I wanted to show you, um, our Pension Awareness Day website. It's called Pension Awareness Day.

We started 10 years ago just doing this for a day, and it got so big of the campaign. We've been doing it, we do it for a week now.

Um, and we spoke to millions of people in that time, which is really exciting.

But for the campaign this week, we have 15 TV shows going on. Um, I wanted to show the webpage where you can book on two other shows.

So if you just slowly go, um, down the page, James, I can show you on the, the first page of the website. We've got a timetable. So yes, we've done two of the shows so far, but we've got 13 of the shows, uh, in the week that you can book onto, which are really, really good.

One of my personal favourites is we've got Steve Web guys come to the studio, um, to talk about the new State Pension, which is a very complex subject.

So we're happy you can click on that book on it, which is great. Um, but James, I wanted to show everybody, so we've had a lot of questions coming in.

If I can't see the show, well, if you haven't seen the show, you won't know about this.

But if you can't see your show or you've booked on other, any other shows, we're recording these TV shows. So you're allowed to go back and watch them at a later date, which is great.

They're gonna be on for the next 18 months or longer.

So you're allowed to keep watching there. Um, we've also got a, yes, it's in the Catchup video section on the site. Thank you, James, for showing that. You'll see the videos there this evening, around five o'clock.

You'll see both, both of you. Oh, really? For this video on there.

So you'll be watching that, I'm sure. And then we've got to, to compliment what, um, Paul and Ryan have said, we've got a useful, sort, uh, useful resource section with some great links in there to the government websites to moneyhelper, pension wise, um, and lots of other, um, useful links that will help through the shows that we have this week.

So make sure you go check that out.

Let's go to the q and as now I'm gonna get the iPad out.

You can get the iPad out, and let's see how this goes. Because Ryan, you're taking the wheel. I'm indeed.

I'm driving.

So we will see. We will see. So I'm gonna refresh the,

the iPad and we're gonna wait. Have we got any questions coming in, guys? Yeah, we have, we've got loads going in. Okay. Well, um, I'm not seeing them on the iPad. Oh, they're coming in. They're coming in. I knew we could. So, um, I'm gonna pass this over to, to Ryan. Ryan, fire away. What questions coming in first?

Okay, so first question coming in from Graham. Uh, so do Nest and Royal London offer the ability to invest in specific stocks? Also, are the funds actively managed by a fund manager? So I'll, I'll answer from a Royal London perspective, and then I'll, I'll hand over to Paul. So, uh, so Graham, um, what, what we're, what we're basically doing is we, we have specific funds within the default.

So the default investment solution is a, basically a basket of different funds.

Okay. So when we're going back to that investment quilt earlier, yeah.

You see the different investments. Um, each one of those was, was, was basically a specific fund. So you've got a head manager for each of those funds within that fund. Um, there will be a variety of different stocks.

So the fund manager is basically making the decision what to in, invest in.

Okay. And it's all basically compiled up.

Very good. Very good.

I'll, I'll just, yeah, quickly from, from their perspective, um, individuals can't invest in specific stocks, but what we do have in our default strategy, we've got these 50 target date funds. Okay. So there's one for every year that, that people, um, people could retire in. Um, and we invest in all sorts of different things in each of those target date funds. Okay. Plus, plus the fund choices.

And then we work with lots and lots of fund managers.

Some of the biggest ones around the world. Some of those are actively, uh, managing funds and some are tracking what are called indexes, where, you know, you just, you're just investing in the entire entire market. So, so it's a mixture depending on, um, what's best for particular asset classes, how we can get best value for, for our members. Brilliant.

Brilliant. Um, I, I'm sure this technology's gonna work.

And there's another question, I'm sure Ryan.

Oh, the flying. They're flying, they're flying through Johnny. Brilliant.

They flying through. Oh God. I had complete faith it was gonna work.

So, great question from Olivia next.

So when should you start investing in your pension? I'm 23. Not myself.

That's Olivia speaking. Okay. You're 24. So Olivia's 23.

And she wants to know when the best time to be investing in the pension would be.

Okay. Yeah. So I, I, I think we, I think we touched on, on this earlier definitely from, from, from my perspective, the, the earlier the better. Absolutely. I've heard that before. The earlier. Okay. Okay. Yeah. So why then what basically, in terms of the, the, the money that you put in the compound interest that you would get over, over the, over the long term? Yeah. Um, I mean, first of all, starting your pension journey at any age is a good thing. Yeah. Okay. You know, there might be some people watching who are in their forties and never started, so it's never too late to start. But what I would say is, the earlier you can start that

Is 23 Good age then. Good age. Yeah. And the, the other thing to add as well as part of the automatic enrolment reforms, uh, it's from age 22. Um mm-hmm. If, if you, if you stay within the pension scheme, you are, you are getting your money, um, you're getting loads of money from your employer and from, from the government through tax relief. Yep. So every year you miss out on that.

That's, you know, that's money you are missing out on, which is some people might think of it as deferred, deferred wages and stuff.

Yeah. Or to a certain extent it's free money. Yeah.


And if people, I was gonna just say, if people wanted to know a bit more about how a pension works, the TV show we had this morning, uh, with Kate Smith, it talks about what is a pension and how does it work?

So you love to that again later in the catch up area. Um, yeah. Smash Smash, yep. They're still coming through. So, question here from James. Uh, Jeremy Hunt has proposed reforms that have the government taking 5% from default fund investments to invest in startup high risk companies. Okay. Um, is this happening?

So I think this is probably in relation to the mansion house compact. Yeah.

That, that, that was, that was recently announced. Yeah. Um, so this is all to, you know, I improve basically liquidity and get more money flowing into, you know, the unlisted type of types of companies. Yeah.


So there's different ways you, you can do that. So a lot of, um, companies signing up to that particular compact, some companies in terms of their default solutions are already doing that in other forms. Oh, right. But it's part of a general drive to really, you know, IM improve investment Yeah. Um, across the landscape in different things. Yeah.

So there's a lot going on. Yeah. I think it's, um, so, so we are investing a lot in private markets. So things like private equity, um, big equity infrastructure projects like the Wind Farm Show showed.

And the reason for that is it's, it's another source of return and we would expect to make more money for our members on, on that basis. Okay. Um, and, and government is trying to take away barriers for, for, for people to, to do that. So it's not, it's not quite right that the government's making pension schemes, uh, do something.

It's trying to encourage pension schemes to think about stuff beyond traditional investments like equities and, and bonds, which, you know, just is fairly sensible. I, I think from our perspective. Yeah.

Yeah. I mean, and that's the thing within default fund solutions, the, the good thing about 'em is that they are so diversified now in terms of the range of investments. You know, we've discussed quite a few of them today. Um, also commercial property. That's a, that's a great diversified. And again, you know, like Paul was talking about the, the, the wind forms earlier, it's another tangible type of investment. Yeah, yeah. You know, you see a build, you walk past a building Yeah. You, you know, you, you can relate to it.

I like that. Yeah. You know, again, in that basket with other types of investments. Yeah. It's great benefits.

No, great. Okay. Um, and how, I'm just looking for time, so Yeah.

We're still good for time. Okay. So there's a specific question that, that I'll take here because it's in relation to a Royal London strategy. Okay.

So I have a balanced lifestyle strategy with Royal London.

So that is the default. So we talk about default solutions. Yep. That is, that is the one, uh, Roland the state, that they regularly review this strategy to make sure it's performing as it should. How often do you review this? That's a good, and that is from Angela.

That's a very good question. Um, very well suited to answer that because I work in the team that is responsible for. Okay. Reviewing that. Okay.

Better be a good answer.

Yeah. So the, the, the answer is that it's ongoing. Okay. It's, we we're doing that all the time. There's a Oh, so it's not just a set time of the year. You do okay. No, no. So it's not like you get committed together once a year and you, you're put some sandwiches for them and yeah. You know, tick out is doing,

When we're talking pensions, and I am visualising what you just said, that would be the case, but it's not. Okay.

There, there is, you know, I you like any of this, you do have to have a formal governance structure in place. Yeah.

And there is some formal governance around that. Yeah.

In terms of quarterly meetings, but it's an ongoing process. Okay.

Now obviously pensions, as we've already talked about, are a long term investment. Yeah, absolutely. So, but we do have to monitor, we're monitoring short-term performance, we're monitoring long-term performance. Yeah. Uh, we're looking at customer outcomes.

So there's a lot that's going on in terms of that review process.

Brilliant. Brilliant. Well, great. It was Angela, was it? Who said that?

It was, it was. Good question.

Good question. Perfect. Okay. So another one here from, uh, Katie.

So on the topic of diversification yeah.

So would splitting my pension into investments that represent a global E T F tracker, e t f exchange traded fund. Okay. Um, so would that be enough, or do we need to diversify across asset classes too?

Um, and then in brackets asking as someone with 30 plus years till retirement, so that's from Katie. Katie

Is a proper pension geek, I would say here. She, she knows the stuff.

That's great.

Um, do you wanna take that or do you want me, shall I, um, I mean, I, I think the first thing is, you know, you we'd need to understand more details about kts kind risk appetite. Okay.

And, and things like that. Um, I think the things we were saying earlier on is a single asset class carries quite a lot of risk. Mm-hmm. Okay. Um, I mean, putting things into, on the whole equities over the last 150 years have massively outperformed things like bonds and, and cash. Yeah. But there'll be long, long periods where they, they'll underperform all, all sorts of things. Ah, okay. So when we started investing our members' money in 2010, there's this huge kind of equity rally where equities performed extremely well. Bonds performed pretty well as well.

But then the last couple of years it's been really, really poor. And before 2010, you had the global financial. Mm-hmm. So there, there is a lot of danger in sticking your eggs in, in one basket. And that term, again, don't sticking all in one basket, spread it about, I mean, even in two baskets. Because you look at, you look at last year, now, last year was a very strange, there was a lot of random stuff that affected markets. Yeah.

But it was a year that both equities and bonds fell.

And now, and that's what we saw in the news.

Yeah, absolutely. Absolutely. So that's very, that's pretty much due to, you know, inflation massively ramping up. And then there's, you know, the, the initial Russian invasion of Ukraine and all the market events and the political turmoil we had in the UK, the mini budget.

So a lot of particular scenarios that that contributed to that.

But I think it really does demonstrate why you need to have broad diversification. So not just your equities and bonds, but the other stuff that we've talked about earlier. You know, your commercial property and your real assets. Yeah, yeah, yeah. Yeah. Makes a lot of sense. And it was last, was it like a perfect storm? Was it once in the r a we saw it, was it 2010 we saw something like this? Did it all crash in 2010? Mm-hmm.

Is this, is this, were we expecting it? Or is it just a freak thing that this all happened last year, the last few years was with Covid and everything, you know, is it gonna get better or we gonna be like, it's

A, a lot of things came together at the, the same, at the same time. Okay.

The, the big challenge about kind of investment is that people don't know what's gonna happen year to year. Mm-hmm.

Which is why the whole kind of discussion about diversification, if you knew exactly what was gonna happen would be, uh, you wouldn't, you wouldn't be worrying about these things because you'll have perfectly predicted Perfect Plan.

Yeah. And then an element of diversification.

And I think it needs to be smart diversification. Yeah. Yeah.

It's not just spreading it out kind of everywhere. Yeah. Yeah.

Is recognising the inherent uncertainty about the future.

You don't know what's gonna happen Yeah. To China, US relations over the next 10 years.There all sorts of things, um, that they can play into it. But spreading your money in a sensible way, having a pension scheme, which is thinking really, really hard about how you can rebalance on, on a regular basis. Mm-hmm. Um, you don't just set it and forget about it. That that's, I think, the importance of having, um, pension funds who are really thinking hard about this. Yeah. Um, gives you a much better probability of doing much better than just sticking your money, uh, under the mattress. Mm-hmm.

No, I like it. I like it. So, um, any more questions? Yeah.

I've got a really, really good one actually from, uh, lc. Lc.

I dunno what lc stands for, but it's, it's from lc. Okay. Uh, so lc, uh,

I'm 30 and I've been saving into my pension for about 10 years. Okay.

I've always had my pension set at medium risk. Yeah.

Should I change this to high risk? And if so, for how long?

Soon as I'm still a way off retirement.

So that, that, that's a, that's a, that's a really good question.

So typically when we talk about default funds, default investment funds, uh, default funds are, are, are usually and typically set for a balanced attitude of risk for, for a balanced investor, middle, middle of the middle of the road. Um, but obviously, you know, everyone has a different attitude to risk.

Yes. I, yeah.

You know, even households.

Absolutely. Absolutely. So for some individuals, they will naturally have a, a higher attitude to risk, which will result in a more probably adventurous investment spot. I've got a high attitude to, to risk with my pension. I've, I've been Yeah.

Good, good. But equally, you know, someone might have a more cautious attitude. Attitude. My partner, she's got the off it to me, she's very cautious. Yeah, yeah, absolutely. That's good diversification in your household. Oh, well that's why we did it. Obviously. That's obviously why we did it.

So, I mean, it, it, it can, it can differ, but it's really, really important that we recognize the fact that all of us as individuals can have different attitudes to risk. So it's not to say, you know, just because you are you young, you're automatically gonna have a more adventurous attitude to risk.

You might well do. Um, what I will say is the, the younger you are, the more you can afford to take risk relative to someone being older and approaching

Their retirement. Because if the investments didn't do so well, you've got longer to recover. You can recover. Okay. You've got absolutely. And then if you're either end of the scale, if you're really risky Yeah.

Didn't do so well.

Absolutely. Yeah, it makes sense. But to, to go back to LCS point there, you know, if, if, if you really did want to check your, your attitude to risk, there are a number of tools to, to use out there. So for example, Royal London have one on our website. Okay. But you can go on there, you answer about 12 different questions. Brilliant.

And it'll actually tell you what your attitude to risk is.

And then that can perhaps be used to tailor to more of a, a suitable investment solution.

That would be good to know, because I just automatically went to, I'm a risky, I'm a, I'm a risk, I just, I automatically went that.

But probably doing them questions I might not be, I just assumed that I was. So it's more, it's a more of robust way of finding out, I guess. Yeah.

I like that. Very good. Very good. I, I like that question, Elsie. Very, very good. Um, any more? Yeah.

Okay. So we've got one here. So, does investments mean that potentially you could lose your entire pension? That is, if it's invested badly?

See, that is a, a question I've never thought of, but a blooming good one. Yep.

Okay. Do you wanna tackle before?

Um, you two are sweating a bit?

So, so, Well I think that the, the, the first thing to think about is, so, so at the moment we're living through quite a period of high inflation and cost of living crisis. If you were sticking your money in the bank, you would be losing money all the time. In, in kind of, kind of real, real terms. Um, if you are invested in really, really, really high risk things where you're putting everything into a single stock or, or a single kind of kind of asset class there, there's a possibility that company could go bust or, um, you know, if it was a single country, that country could default on it on, on its debt.

Um, so yeah, it is a possibility that you could lose, uh, a lot if not all, all of your money. Oh. So you can actually, you're not gonna say, guys, we're gonna pull the pluggage 'cause you're going to, we're gonna try and save you a little bit. It's if you've taken that decision.


Potentially. If, if you, if you've bought a government kind of debt, it's, Russia was a really good example. Mm-hmm. We, we stopped investing in Russia, um, because it was impossible to access any of that, any of that money. Um, so, so I, I think that just kind reinforces the point that if you stick everything in one thing, you are running a lot of risk. I mean, the return could be amazing, but are you prepared to, to take the downside, having a balanced portfolio where you invest in all sorts of different things and those, the balance of those investment change as you get older and you have different priorities, I think, um, I think we'd say that that's probably the sensible solution for most people most of the time. Yeah. Okay.

Okay. Yeah.

Okay. I've got a great line. I keep saying through these TV shows and everything that you are hearing today is guidance. It's not advice. So do not do anything that we say here, but the, the, the guidance that both of you're giving is brilliant.

Brilliant. Absolutely. Absolutely.

Great. Um, I'm just looking at the time. We've got 10 minutes left.

We've got 10 minutes. Okay.

So a questionnaire from kc, pretty generic one.

So regarding ESG and sustainable investments, et cetera, um, is there any way to know, uh, where and how my money is being invested?

So what I would say to that is obviously depends on what pension you're using, what, what default fund solution outside the default funds. Uh, but my, my advice there would be to look on the what company's website. Okay.

Look at their fact sheets. There's, there's plenty of stuff out there, uh, that's more engaging than your traditional old school fact sheet that wasn't very engaging. Okay.

But there's a lot of new stuff coming out in looking to really improve the transparency of where you're invested.

And there's been some great campaigns over the year as well that are trying to increase that transparency really. So, you know, people can actually look at not just what is the name of the default fund or name of the funds you're invested in, but lifting the bonnet up and actually looking at what type of companies and sectors in that. It's really cool. Long way to go, I think. But, you know, I think it's something that our industry is really trying to correct. So, so, so nest everybody in, um, in our default strategy can see all of the companies, uh, that they're invested in.

And we have like the descriptions of what that company does. Yeah.


What kind of sector they're in. So, so we are really, really keen that people understand. Yeah. Yeah. It's their money, you know?

Yeah. We, we are trying to do, um, people

Forget that sometimes that it, it is their money.

It is not the fund manager's money. It's not our money.

It's our member's money where we put it. You know, people, people want to know.

I mean, people, we, we, we are acting on their behalf. We should let people, we should be as transparent as possible to let people know where their money's going, and then we want hear from them. If, if people have, have concerns. It's really, for me, it's really refreshing today, hearing from both of you, coming from the pensions industry and be able to talk like this.

It kind of makes, pensions are very boring. No two ways about it.

But both of you today have made it, you know, they're very exciting. Yeah.

Really, really exciting. Yeah.

I, I, I think too, too often it's been investment and finance is something that are for other people. Yeah. And it's about, you know, people making an enormous amount of money for people who already have an enormous amount of money. Yeah, yeah, yeah. Yeah. Automatic enrolment. It's, it's a, it's been a revolution in this country in terms of, you know, over 80% of the population now has access to an occupational pension.

All of their money is going into all sorts of kind of things in this country and, and around the world. It's, it's, it's really important what happens to, to it because, 'cause it's important in a way that the economy would perhaps just happen to people in the past. Mm-hmm. Whereas now people are part of the economy.

They own the companies. Yeah. Um, it, it, I think, I think it's really powerful on, on that last bit about the, there's some stuff about kind of fossil fuels as well. Yeah.

There's lots of debate about should you be completely outta fossil fuels. Yeah.

And, um, our ethical fund, for example, there is no investment in, in fossil fuels for our default strategy. We are, um, we've tilted away from the highest emitters of, of carbon yeah.

And put more money towards, um, those companies which are kind of driving this transition to a, a sort of a net zero world, which, which needs to happen, um, for, for, for everybody.

We are not in a place where we think it makes sense to get out of every single kind of fossil fuel company.

A lot of those companies are gonna be part of that transition.

So we want to encourage them to go further and faster. Yeah.

And where those companies just aren't, you know, aren't, aren't stepping up to, to, to, to the plate. We will then exit from, from those, those companies.

So you are essentially putting pressure on them people to sort of like, we have to make more of an effort with this transition.

We're not just saying it. Yeah. We've got to do otherwise. Yeah.

Yeah. I mean, very good. You, you've, you've seen what's happened with, with the weather just here kind of, kind of recently. Yeah, yeah, yeah.

This is climate change is affecting, uh, you know, investments right now.

Yeah. How do we make sure our members, um, kinda money is, is managing that risk that, that they're facing and how do we, um, help those companies and, and kinda make more money from, from the transition to a green economy? I think it comes back to that point we were talking about earlier where responsible investing is now becoming standard. Yeah. You know, within, within, within default fund. So this isn't, you know, it isn't a case of having to self-select and go off and find your own investments that do this.

Which it was, uh, what was it a bit ago? Like that if you wanted to be a it's quite niche, I think.

Yeah. It's becoming more wide scale now. So Yeah. At, at Royal London, very, very similar to, to what, what Paul said actually as well. So we're, we're doing the tilting in terms of looking at companies in terms of carbon emissions, so tilting towards those with better credentials in that particular area, but not completely disinvesting from certain sectors because of the power of, you know, engaging with these companies and voting AGMs. It's a very powerful thing. Yeah. Yeah. And you do see, um, adverts, you would've seen like fossil fuel companies now when they put their TV ads on TV, the side of showing wind turbines that we see there, they're showing, you know, that was us then. This is us now. Yeah. We're on that. Yeah. Yeah.

That's, that's, that's a very powerful, uh, great question from Damien, which I think represents a, a particular issue at the moment or what we've had over the last year.

So Damien's question is, I am in a default low risk two years from retirement.

Mm-hmm. So two years to go till Damien's retirement age. Okay. Uh, the last two years my pot has collapsed and is now less than I put in.

Should I stay with it or move to a higher risk fund?

So I think the caveat there, obviously we can't give advice in terms of specific situations like

Yeah. We're just guidance

It. Exactly. Exactly. But I think what, what, what Damien is pulling out here is a, is a real issue that has happened particularly over the last year when I talked to the fact that it's so sad. Like it's an awful it is story. So, you know, we, we, you know, we've talked previously about pensions being long term yeah.

But for people with two years to go to their retirement, it's, it's not that that long term. Yeah. And what we've, what we've seen over the last 18 to 24 months is both equities and bonds fall at the same time, which really doesn't usually happen.

As I said, that was a very bizarre set of circumstances that, that, that, that led to that. Uh, what I will say is we, we, we are starting to see recovery in those different investments that, that have fallen over that, that the last 18 months. And again, in terms of that, that question about do we need to take more risk? Mm-hmm.

Yes. That's potential one route.

But I think individuals need to understand that, that there are different attitudes to risk out there. So for some, okay.

A high risk strategy won't be appropriate because, you know, as Paul mentioned earlier, we, we don't know what will happen next year and so forth.

Yeah. So it could be in a worse situation than

Now. Potentially now. Potentially.

Okay. Wow. Wow. Okay. Um, so we've got about three minutes left.

Should we squeeze in one last question if that's okay? Yep.

Okay. So this is, this is a good one. I think, um, quite a lot of individuals watching today might, might get a lot of benefit from, from this, but is there a website people can use to compare funds offered by pension providers? That's good, man.

So I recently changed how my pension is invested and there were similar funds, but with different fees. Yeah.

So I think what I will say on this is that there are a lot of tools and a lot of websites out there. Yeah. Um, the majority of which are aimed more at, I would say financial adviser audience. Okay.

For financial advisers to then dissect and digest all of that. Yeah. And, and, and really because it can get, it can get quite complex. Yeah. I can imagine.

When, when, when you're, when you're looking at different things, obviously when you go and provider websites, you know, you, you will get the range of different investment solutions there that you can offer. You can look at the charges, you can look at where they're invested, very, very transparent. Um, in terms of one website that has everything on it.

I'm not aware of one from, from sort of like the general public perspective in terms, in terms of looking on. But what I will say is it, it needs to happen going forward as an industry. Okay. So I think the more transparency we can show in this, well if, if people wanting it. Yeah.

Absolutely. Yeah. Yeah.

Absolutely. I mean the, the, the last bit of that question talks about fees.

Yeah. Um, and there's lots and lots of debates about kind costs of kind of pensions and costs of investing. Mm-hmm. And I think healthfully, the debate is moving much more about kind of value for money. Yeah. Yeah. We, we wanna move away from a kind of a race to the bottom to the cheapest is the best. At the same time it's very, very easy to be, be charged a lot for, um, for, for services that are, that aren't that great. Mm. Um, with the occupational pensions schemes that a lot of people will be in, um, there are caps on how much is spent, um, on, on, on the fees.

And that's a, um, 75 basis points. So it's, you know, it's pretty cheap compared to to to what it used to be. Okay.

But people like rural London and, and nest much, much, uh, kinda less than that. And we're still able to have investment strategies that are including all sorts of, you know, quite, you know, these are expensive asset classes, but through the kind of benefits of lots and lots of people coming together,

I'd say that you buy

And having a lot of, and having a lot of assets and stuff, we can drive costs and charges down across the industry.

So scale is really, really important in, in, in a lot of this.

That doesn't mean that small schemes can't, can't be successful, but it's harder to get access to some of the asset classes we've been, we've been talking about it's harder to do diversification as well. Um, so it's important to look at fees, but you need to look at lots of other things, uh, as well when, when, when making those decisions.

Brilliant. Well, I've learned so much today about how my pension is invested. I hope all of you I've learned as much as I have. I'm sure you have.

And enjoyed it. Paul, you've been fantastic. Paul from Nest,

Ryan from Royal London, you've both been brilliant. You did great with the, the question, I'm sweating there.

That's rolling. Well, it's good. It is good. And just to let you know, all the questions were sent in by Rachel and Noel in the background, so you guys had no clue. What we're gonna ask you today is all from you.

So thank you for joining us. We've got another session today at three.

If you haven't registered to it, you can go to the pension awareness day.com website where you can register for other. And that show there, thank you for joining us.

We've loved seeing you. We've seen both of you too. We'll see you soon. Bye.


Bye. Cheers. Thanks.

As part of Pension Awareness Week 2023, our pension experts Clare Moffat and Sarah Pennells took part in a live session all about workplace pensions. Where they covered everything from salary exchange to employee contributions. This session was recorded on 12 September 2023.

Useful links

Hello and welcome to the Pension Awareness Campaign Week. I'm Johnny, and today I'm joined by two special guests, Sarah and Clare from Royal London.

How are you both doing? Good, thank you. Really good, really good.

Looking forward to this. I am too, everything that you want to know about pensions, but we're afraid to ask.

Yep. So there's no, we're just saying there's no silly questions here. Is there?


So we're gonna hear from you all your questions about pensions in about 20 to 25 minutes. Um, but before we do, I just wanted to say welcome to the channel and welcome to the show. Today we're gonna hear from Clare, Clare and Sarah get it right way round.

But we wanted to say a quick shout out to our partner this year. I dunno if you can see that behind me. I'll go behind me in a minute. Pension Attention campaign, it starts next week, on the 20th of September, they're going to launch a special announcement.

So you need to look out for that logo over my shoulder pension attention. Look at our look out for it next week.

But Royal London are big supporters of this too. So you'll be part of that.

We absolutely, yeah, part of that. So, um, so Johnny, is it not time for you to go? What? What do you mean? What do you mean? Take a bit of time off.

I'm getting chucked out. Well, okay. Not sure we need you. I know my cue.

I know my cue. I feel, I feel I've got to go right.

I'll see you both in a minute a bit. Take care. See you later Johnny.

Okay, so Sarah, back to basics. What is a workplace pension?

Yeah, I say we're in charge for the next 20 minutes or so. It's fantastic.

Anyway, so really good question Clare. I think before I start, uh, talking about what a workplace pension is,

I'm just gonna start with the really basic starting point, which is what a pension is. Now of course if you're a pension geek, you'll know that a pension isn't like a savings account that you can sort of dip in and out of when you need money.

It's designed quite simply to provide you with an income when you retire. And that means that you can't take money out when you're in, you know, your thirties or your forties. In fact, you have to be aged 55 or over before you can take any money out of your pension. And that age is rising to 57 in April, 2028.

When it comes to workplace pensions, we'll put very simply, that's just a pension that's provided by your employer.

Now under what's called the automatic enrolment rules, that means that if you're an employee or if you're a worker, so you could be somebody who's on a permanent contract, you could be on a fixed term contract or you could be on something like a zero hours contract. Well, in that case you'll be automatically enrolled into your employer's pension scheme as long as you meet three conditions of automatic enrolment.

So the first condition that relates to your age, so you have to be 22 years of age or older. And under the State Pension age, which is 66, the second condition that relates to where you work.

So you have to work in the UK. And then thirdly, the condition relates to how much you earn.

So you have to earn at least £10,000 a year in order to be automatically enrolled. So far, so simple but not so fast because of course it's pensions, which means it's not always simple. So say for example you have two jobs, you are working part-time, that £10,000 limit applies to each job.

So if you have an example of one person who's earning £10,001 a year from each of their two jobs and under the automatic enrolment rules, they'll be automatically enrolled into two workplace pensions.

But if you have somebody else who's earning £9,999 a year from each of their jobs, then they won't be automatically enrolled into either of their workplace pensions.

Now automatic enrolment just means that you are kind of plunked into your employer's pension without you having to fill in either paper forms or an online form.

But it's not like the pension's equivalent of house arrest because you can opt out of your pension if you want to. Now, once you're in your workplace pension scheme, then that just means that some money will be paid into it both from your own salary, from your employer making their own contributions, and then you'll get a top up from the government in the form of tax relief.

And to give you an idea of what that breaks down to, and I know that pension geeks will know this already and probably recite it regularly in a very sort of broad brush way around 8% of your salary will go into your pension as a minimum. And I say broad brush because there are different ways that companies might calculate how much goes in.

So you could find that less than 8% of your salary goes in, but the way that breaks down is that you pay in 4% as the employee. Your employer pays in 3% of your salary and you get 1% as a top up from the government in the form of tax relief.

Now, tax relief, that's one of those terms that when you mention it, sometimes people's eyes glaze over, but actually normally when I explain it they kind of go, wow, I didn't know it worked like that. So I think it's good to look at an example.

And so if we look on screen right now, if you're a basic rate taxpayer and you want to pay a £100 into your pension, then actually all you have to do is pay £80 into your pension because the government top it up with another £20.

And that's because you're paying basic rate tax at 20%. If you're a higher rate taxpayer or an additional rate taxpayer, you'll get either 40% or 45%. Now on the right hand, um, side of the scheme, you can see an example for a higher rate taxpayer.

So they only need to pay in £60. Now you should say if you are at a higher rate or an additional rate taxpayer, then you might not get that money automatically.

You might have to claim that difference between the 20% and the 40 or 45% back through your self-assessment tax return.

But there is a limit on the amount, of pension contributions you can make and still receive tax relief. Um, but for most people you really don't have to worry about it and that's because it's based on your earnings. So if I earned £20,000 a year, then I could pay £20,000 into a pension and receive tax relief and it's based on my um, earnings.

But you don't have to be earning to be able to make a pension contribution if you're not working.

You can pay up to £2,880 a year and the government topped that up with that 20% to £3,600. Um, and that can go into your pension and you can have a pension at any age including children.

So there are different rates of tax though. And if you live in Scotland, it's worth saying that you might be paying, um, more tax than the rest of the UK. So for example, if you pay 40% tax in England, you'll be paying 42% income tax in Scotland.

But there is good news, the more tax you pay, the more tax relief that you get. So there is a bit of a silver lining to um, paying more tax.

I like your determination to find the silver lining of paying or paying more tax. So anyway, talk to a wee bit there about what a pension is and a bit about how much you can pay in. But let's spend a moment or two talking about the different kind of workplace pensions. So there are two types. The first is a defined benefit pension.

Now that's the kind of pension that most commonly you'll see in the public sector these days. And the key difference with this pension really kicks in at retirement. So when you are working, you get paid your salary every month once you retire, if you have a defined benefit pension, then you'll get a payment that carries on just in the same way as you received your salary. Except it'll be less of course. And the amount that you get when you retire will depend on how long you are in the pension scheme for and your salary. Now, as I said, you'll get that payment that will last throughout your life and if you have a sort of husband, wife, or partner and they outlive you, then they'll get that payment normally for the rest of their lives as well.

Now generally you won't get a defined benefit pension payment until you stop work.

Now the second kind of pension is a defined contribution pension. And that's the kind of pension that you can either take out individually or as we've been discussing through your workplace, your employer scheme.

And with that kind of pension you basically build up a pot of money and then you can convert that into an income, take some money out when you retire.

Now that's the kind of pension that we're really gonna be focusing on for this webinar. And the reason is simply that it's the pension that you are most likely to be paying into now, but you may have a defined benefit pension from a previous job.

You could have both kinds of pension, but as I said, we're gonna be focusing on defined contribution pensions.

I knew I'd do that for this webinar. So, there are ways in which you can pay more into your um, workplace pension.

Now one of those ways is through something called salary sacrifice. And often people have said to me, well my employers mentioned something called salary sacrifice, but I don't really understand what it is now. It's also called salary exchange. And those terms are used interchangeably and what it means is that you give up some of your salary and in return your employer will pay their pension contribution for you and also your pension contribution.

Well that sounds a bit confusing, doesn't it? So again, let's a bit, let's look at an example because I think that will help.

So in the example on screen, we're looking at Sam.

Now there's a lot of numbers here, but what I want you to focus on is that before salary exchange position and the after salary exchange position, so before Sam's salary is £35,000 a year, he pays tax, he pays National Insurance and he pays a pension contribution of £1,400 a year. His employer pays a pension contribution of just over £1,050 a year. His take home pay is £26,000 to £422.

But Sam decides to do salary exchange. So what does that mean? Well, it takes his salary to just below £33,000.

Sam doesn't pay any pension contribution anymore, but his employer pays it on his behalf.

His take home pay is the same £26,422. So why is Sam going to do this? Well, it's because of the tax and National Insurance savings that are made.

And that means that instead of that, £2,500 going into his pension, there's actually £3,251 going into Sam's pension. So a much higher pension contribution.

Now you can be like Sam, and what you can do is have a higher pension contribution, um,

and the same take home pay, but you can also choose to have this, um, the same amount of a pension contribution and actually have more take home pay.

Now salary exchange is a benefit for most people, um, but it is worth mentioning that's a change to your contract and it has to apply for 12 months. Now I mentioned it's a benefit for most people.

There are certain people where salary exchange won't work, but your employer will keep you right about these kind of circumstances.

So for example, you can't salary exchange if it would take, um, your pay below the national minimum wage.

Now not all employers offer salary exchange. If your employer doesn't, there will be tax savings for them. So it is worth asking them about this.

Now there's another, um, thing that can be offered and that's called matching. And again, I think it's worth looking at what I mean when I talk about this.

But essentially what happens is if you pay more into your workplace pension, so will your employer. So there can be all different amounts that employees, employers will match, but in this example, the basic amount being paid into the pension is 4% of salary by the employee and 4% of salary by the employer. But if the employee pays 5%, the employer will pay 5% of salary. If the employee pays 6% of salary, um, the employer will pay 6% of salary.

Now that sounds quite expensive, but it's not as expensive as you think. And if we look onto the next slide, you can see what I mean by that.

So in this scenario before the increase in matching, so this person is doing the basic amount to begin with, they pay £80 into their pension scheme, the government tops that up, that £20 of tax relief and the employer pays a hundred pounds as well into the um, pension.

So £200 a month is going into the pension. But if they choose to do matching to the maximum in this scheme of 6%, what happens is the employee's going to pay £120, the government will top it up with £30 and the employer will pay £150. £300 is going to go into the pension scheme then. So there's an extra £100 going into the pension and it's only cost the employee an extra £40. Quite a good deal.

Yeah, I think this figures really bring to light the difference. As you say, it's not costing the employees so much to have all that extra money going into their pension.

So one of the things about a defined contribution pension is that you can have control over what happens to your pension contributions in terms of where that money's invested. But some research that we've done quite recently shows Clare, I think that there's quite a lot of confusion about what happens to the pension contributions.

So we did some research with our workplace pensions and we did it with a really robust sample size.

So it's 6,000 UK adults of whom four and a half thousand had at least one pension. And what we found was almost one in 10 people.

So it was actually 8% thought that their pension contributions went into a savings account. Now among younger people, so among people aged 18 to 24 who had a pension that rose to one in four, thought their pension money was going into a savings account.

Now I think in some ways it's not surprising, people do get confused, but it is worth just explaining what happens. So the pension contributions, and by that I mean the money that you pay in the money your employer pays in and the tax relief that Clare's been talking about from the government, well that's invested into a fund or funds. And these themselves invest in different assets.

So that could be they're investing in companies by buying shares or they're investing in government debt. Now that's typically called government bonds.

And if we're talking about UK government debt, then it's normally called gilts.

And also it could be investing in commercial property, which could be anything from an office block to a shopping centre.

Now there will be a mix of those different assets depending on the pension provider and depending on the fund you're in.

But this slide here just shows I think some of the sort of the mix of different assets that your pension fund or a pension fund may have. And of course your fund may have a different mix of assets and to different percentages. Now, if you want to know more about how your pension money is invested, then one of our colleagues, Ryan and Paul from Nest did a whole webinar on this yesterday.

So you can, uh, check out the recording of that if you want to know more. Um, yeah, and I think it's just worth talking. Now, I've mentioned a bit about how the money's invested, maybe talking about default funds, what do you think?

Yes, so if you're in a workplace, um, defined contribution pension scheme and you haven't done anything to change your funds, then you'll be in something called the default investment fund.

And I think a lot of pension geeks would know that. What they might not know is the default investment funds will vary from pension scheme to pension scheme.

But there is one thing that's common to all of these and that's that the default fund has to meet the needs of most of the workplace pension scheme members.

But you don't have to stay in that default investment fund. Most people do.

So a large majority of people who are in um, workplace pension schemes will stay in that. But you can switch if you want to.

Now you might want to switch because you want to choose something that aligns with your principles and beliefs.

So you might want to invest in sustainable funds, for example, or compliant fund or you might want to take more risk or, or even less risk. Now you shouldn't be charged if you want to switch between different funds.

What you have to make sure though is that you're comfortable with the level of risk that you're taking if you move, um, funds. And that's really important, isn't it?

Yeah, it really is. I think it's crucial, but it's, I think it can be quite hard to think about risk and to get your head round how much risk you might be taking. So say to take Clare's example, you want to switch from the default fund to riskier funds because you want to generate a bigger income in your retirement. Well, switching into a riskier fund means you're taking more risk.

It doesn't necessarily guarantee that you are gonna get a greater return.

The idea with a, with a riskier fund, basically you are gonna have more volatility. So that means more ups and downs, those ups and downs could be quite sharp. Now the hope is, the idea is that over time those ups and downs really smooth themselves out and there are more ups than downs.

So you get a better return than if you'd kept the money in at a default fund.

But there's absolutely no guarantee that that's the case.

And as with all investments, you could get back less than you pay in.

And I, I think as you said, thinking about risk and the kind of funds that you might want to transfer to that can be quite difficult.

And it's one of those occasions when having a financial adviser is really useful. But we know that a lot of people don't have a financial adviser.

And you may not have an adviser, particularly if you are younger, but we've got lots of really useful content on our website, Royal London.com, we've got an article on what a financial adviser does, how to prepare yourself to talk to a financial adviser, kind of questions to think about.

And also we explain the different advisor directories where you might be able to find, uh, a financial adviser.

So that's something that's really useful to check out.


I think that is really useful. But you might be thinking, well, where do I find out, um, where my funds are invested? So it'll tell you in your annual pension statement, your provider might have an app that you can log into and you can look there, um, or you could have an online portal and again, you could log in and find out what you're invested in.

But I want to move on to thinking about something different now. Now Sarah, you mentioned that we had carried out some research and that research also showed that one in five people didn't know how much they were paying a month into their pension. Not only that, but even if people did know what they were paying into their pension, 40% of people didn't know that if that was going to be enough to give them the retirement they wanted.

So a lot of people in the dark about knowing how much they needed to save for retirement to give them that retirement lifestyle they want.

And I think this can be quite a challenge for some people, understandably, to think, well how, how much do I need in retirement?

How much do I need to save?

And I think it is really important to kind of start at the end, if you know what I mean, to work backwards.

So to try and think about what kind of lifestyle do you want in retirement and what's the kind of things that you want to spend money on.

So I think the two biggest factors that are going to influence how much money you need to have at retirement and therefore working back, how much you need to save are when you want to retire, and the kind of standard of living that you want to have in retirement.

So it is useful to think about some of the things you might want to be spending your money on. Now if you have a budget already, I think that makes the task much, much easier because you'll already know you'll have a list of the money coming in and the money going out and you can sort of look at those and think, well, I'll be spending this money when I retire. I won't be spending this, I might be spending less on that. I do think though, you know, obviously we love pensions. We find them utterly fascinating, but strangely, strangely, not everybody's like us.

And I think thinking about budgets and pensions and retirement and planning, it can make some people want to run into a darkened room with a damp towel.

And I think if, if that's your reaction then maybe it's about shifting how you think about retirement. So rather than thinking about the numbers and about, you know, think about, okay, even if you don't want to retire for years, you love your job, you want to carry on working well, that's fantastic, but having enough money into your pension doesn't mean you have to stop work.

You can carry on if you want to. What it does mean is you don't have to work in order to pay your bills. How fab would that be? So I think, you know, once you've shifted your thinking about retirement and maybe started to work out what you might want to do in retirement and what that might cost you, I think a good starting point is to think, okay, assuming I've got no pension at all, what would I have to live on in retirement?

And for most people that's gonna be the State Pension.

So under the new State Pension rules, assuming that you've got a full National Insurance contributions records, that's 35 years, I've either you've paid of National Insurance or been credited with, then the State Pension will pay you £10,636, this year. Now that works out at £886 a month or so.

Now obviously State Pension amount goes up normally every April.

So you're thinking, okay, £10,636, still don't know what that's gonna buy me in retirement. Can't quite picture how I'm gonna live.

Well let me save you the trouble because last year I and five of uh, our Royal London customers lived on the State Pension for a week.

We did a State Pension challenge. And I remember talking to you about this at the time, Clare, that it was actually really hard. I think we all found it quite difficult.

And I think the two things that I took away from it was firstly, there's there's no slack in the system. So, you know,

I found that I had very little money left over, certainly not anything to kind of build-up savings with or to kind of think if I had one of those unexpected expenses, I'd have some money left to pay for it.

And the other is being brutally honest, I think it's one thing living on the State Pension for a week, it's another thinking, this is gonna be what I have to live on year after year and retirement could be 20, 25, even 30 years. So I think the next thing to think about is, okay, I know how much the State Pension's gonna give me, how much more than the State Pension do I want to live on?

One thing to just say about the State Pension before Clare picks up, which is if you want to know more about the State Pension, we've got a guide on our website, which I wrote, which explains the, the basics of how the State Pension works. And tomorrow says, Steve Webb is doing a, a Pension Geeks webinar, a Pensions Awareness Day webinar, all about the State Pension.

So do sign up for that if you haven't already. But as I said, I think one thing that I found helpful as a result of doing this living on the State Pension challenge was start to think about what do I want to do in retirement and what might that cost me start to mark out some costs against it.

And there's a really useful website called the Retirement Living standards, dot org.uk.

Now that website is based on independent research and they are really looking at what you would need in an annual income to have the lifestyle that you would want to have.

So you'll see different amounts and research have sort of kind of looked into that to see um, you know, what different lifestyles, um, would mean for different people.

Now it's important to say that these numbers I'm going to mention they're based on the fact that people won't have a mortgage and they won't have any rent to pay and any tax on pension income, uh, will be paid.

So there's three lifestyles. So if you, if you're single and you live outside London and you're happy, having minimum lifestyle in retirement doesn't sound

Good, I have to say doesn't sound good.

I think most people probably wouldn't want to have a minimum lifestyle, but the researchers reckon you need to have £12,000, um, £800 a year if you want to have a moderate lifestyle. So a bit better, you'll need £23,300. And for a comfortable lifestyle, well that's £37,300.

Now for each of these lifestyles, where the website's really useful is that it explains that what you could do with that money and what you could afford to do. So how much could you spend on food, clothes, shoes, doing up your bathroom, kitchen, how many holidays or the type of holidays that you could go on and if you could afford to have a car, um, and if you can afford to have a car, how often you'd be able to replace them. Now if you're part of a couple, um, the numbers increase but they don't double. And that's because it, you know, it costs less for two people living together than two people living separately.

So as a bit of a guide, um, instead of £23,300 for a single person, um, on a um, moderate lifestyle, you'd need £34,000.

Now it's worth saying if someone has um, reached State Pension age and they have their full contributions, then State Pension could um, you know, use up some of that money essentially. So you're £10,636.

Well if you were looking at that £12,800, that's going to make up a fair proportion of that money, but it doesn't cover all of it.

That's right.

And I think you mentioned there about the State Pension and being a State Pension age and I, I, 'cause we know now the State Pension age is 66,

I mentioned that right at the beginning. But thinking again about your retirement, I think it's another really important factor to consider is when do you actually want to stop work?

Do you want to have to carry on working whatever lifestyle you want, whether it's minimum, moderate or comfortable until you get your State Pension?

Which as we know the State Pension age is rising.

So it's just one thing to bear in mind. Most people don't.

No, they don't want to work till 66, 67 60.

We've all got an idea that we'd love to retire earlier than

That. Absolutely.

And we did some State Pension research over the summer and I think that showed a lot of people wanted to retire either 60 or 65, didn't want to wait until the State Pension.

But I suppose one thought that sort of is occurring is what happens if you are in the enviable position where you are on a really good salary and you're thinking actually help, I maybe want to make up a bit of a for lost time.

I want to tip a whole load of money into my pension. Now again, I know know we're in a cost of living crisis, but let's just assume you are on a really good salary and you could actually afford to pay your whole salary into your pension. Bear with me on this one.

So say you've got a hundred thousand pounds, could you put that hundred thousand pounds into your pension?

Well the answer is yes, but there could be tax consequences. And the reason for that is something called the annual allowance.

Now the annual allowance is the maximum amount that you can pay into a pension in any one tax year without facing a tax charge.

Now the annual allowance is currently £60,000. So for most people it's not relevant because you know, most of us are paying far less than £60,000 a year into our pension.

But I think it's still worth understanding how it works.

So with this example of somebody who's in this fortunate position, they're in a hundred thousand pounds a year, they have no expenses, they want to put it all into their pension.

They could put £60,000 of that hundred thousand pounds into their pension without facing a tax charge.

But if they wanted to put more in and potentially there could be tax consequences, but there is a tax concession and that's called carry forward.

And what that means is that you can go back for up the last three tax years and if you haven't put in the full annual allowance into your pension, then you can potentially do that. Now again, this could be another darkened room, head melting moment.

So this is another situation where I think a financial adviser is really helpful because they can just explain the different amounts that you could put in and make sure that you are kind of right in terms of your tax and sorting out your self-assessment return. For example. I think it's particularly important to get financial advice if you are a very high earner and you are in a defined benefit pension.

The reason is that working out how much you could pay in isn't as simple as sort of taking a percentage of your salary. Now, if you are thinking carry forward sounds fascinating, I really want to read a whole more load more about it then the government backed money helper website has a really useful article on that and that's at moneyhelper.org.uk. I think though, if we think back to Clare when we've been doing, um, webinars together, um, our Royal London webinars, the question that's come up almost at every webinar we've done, the most common question has been about I've got pensions from old, you know, previous jobs, should I consolidate them into one pension?

So in the last few minutes I think I'll just spend a moment talking about this and as you might expect there isn't a simple answer. The answer is yes, potentially you could and possibly in some situations, situations you should, but definitely not all.

And there are some situations where you absolutely can't do it. So for example, if you are in a defined benefit, you know, one of these public sector pension schemes such as the NHS, teachers, police, or firefighters, then you can't transfer anyway.

And the reason is there's no fund for you to transfer.

So the pension contributions that you pay today go to pay today's pensioners.

The one exception is the local government scheme because there you are actually building up a fund. So you could in theory transfer it, but it's generally assumed to be a bad idea. So let's assume you're not in that situation, but instead you've got maybe three or four defined contribution pensions from previous jobs and you're trying to work out whether or not to transfer them.

One of the most common reasons why people think about transferring is for charges.

And by that I mean they want to transfer to a pension that charges a lower charge than the one or ones that they have from their previous jobs.

And it's definitely the case that putting your money into with a pension provider or or in funds that have lower charges can be a good idea, but cheapest isn't always the best.

You might be paying a bit extra for one or more of your pensions, but it could have features that are really valuable to you.

The second reason why people might transfer is to get a wider variety of investments or potentially you might, as Clare mentioned earlier on, be really interested in sustainable or responsible investing.

So you want to move to a pension provider that specializes in those kind of investments. Transferring though to get a better return, there's, there's absolutely no guarantee. As I was talking about earlier on with risk, there's no guarantee that you will get a better return if you transfer.

There are, there is one other situation where you might want to transfer, for example, if you've got some old pensions that are quite restricted in terms of how you can take money out. So for example, when you retire they might want you to take out all your pension in one or that that's a pensions word by the way. Or they might, um, not let you do something called income.

Draw down one last sort of word of warning, which is if you have some old style pensions, they could have some valuable guarantees that you would give up by transferring.

So for example, they may give you a, a guaranteed rate that you would benefit from if you bought an annuity or a guaranteed value.

If again you're thinking actually I would really like to know more about this then the Association of British Insurers, the ABI and cushion are doing a whole webinar on kind of everything you need to know about transferring your pension. And that's tomorrow.

So for the last couple of minutes I want to talk about stopping paying into your pension. And you might be thinking, well why is someone from a pension company telling me to stop paying into my pension? Well, I'm not. Why? Well, research shows us that people are not paying enough into their pensions. Um, and I've never met anyone who's retired and said, I wish I'd, you know, I'd paid less than my wish.

I had best money in my retirement. Yes, always, always the opposite.

But the second reason is because of the fact that if you're in a workplace scheme, you're getting the benefit of those employer contributions.

And it might be that you're getting really generous employer contributions like we spoke about earlier through salary sacrifice. Um, and because of matching and don't forget the benefits of tax relief too, but if you are thinking about reducing your pension contributions or pausing them, um, then I want you to think about now, but I also want you to think about the future. And again, we've got an example on screen just to help us think through this.

So in this scenario we have someone who's, um, in a matching scheme, it's quite a high matching scheme and that's just to sort of show the fact that this person would save a lot more if they stopped paying into their pension than someone who was, um, in a kind of a, a lower matching scheme, for example.

So in this scenario, if this person stopped paying into their pension, then they would, um, save £187 a month.

So that would go into their bank account, but they'd be losing out on £546 a month going into their pension. Now if we think about this on an annual basis, we look at the next slide. Well what does that mean? Well, it means that, you know, in your bank account you would have £2,244 more in a year, but you would've lost over £6,500, um, in pension contributions in that year.

And of course pensions are for the future. So if you're 40 now and you want to retire at 60, then in 20 years’ time that just over £6,500 could be worth over £16,500, um, using 5% growth, um, after charges.

So it's really important not just to think about saving money now, but also about the future. But it's really important to see that we are in the middle of a cost of living crisis and for people who are struggling to pay their bills, then pausing or reducing pension contributions could be the best um, idea. So we have covered a huge amount in the last 25 or so minutes, um, but there might be topics that we haven't covered. Indeed, indeed.

So I think it's time now to, um, look at some questions. Yeah, so we did say everything you want to know about pensions, but we're afraid to ask. So there may be some things that we, you know, that people are not afraid to ask but actually want to know the answers to. So, uh, have we had any questions? Is there anything that's come through?

Hello? Hello? Hello? Hello, hello, I'm back. I've been, I've been sent to the back of the classroom. Good. I'm here, I'm here.

Hopefully I enjoyed that. Hey, what a great show. I've learned so much. I've made loads of notes on my pad, I've learned about salary exchange.

I dunno how you both made this subject so simple. I really, really love. Lovely to hear. Um, really interested. I'm gonna talk, ask more about, um, children having a pension and never realised you could could start so young.

So that's really good. Um, there's a popular present under the Christmas tree. Children love it. Honestly.

They will love, they will love unwrapping a pension more than anything else.

So honestly try it.

Well, we'll try that, we'll try that.

And also really good to know more about, you know, PAing your pension.

It is something a lot of people are thinking about right now. Yeah, yeah.

But knowing what you can potentially be missing out on. Yeah, really important.

So thank you for that. Um, I just wanted to, before we go to questions, so we have lots of lots of questions for you today. Um, I wanted to quickly go to the Pension Awareness website.

So you are all on this now, obviously watching this show. But afterwards, please don't click on anything now 'cause we'll be uh, cut short. Um, but go and use this website after the show.


You can book on more shows. Um, as Sarah said earlier, there's um, Steve Webb coming on Thursday. Um, is he Thursday or tomorrow? Wednesday.

Wednesday he's coming tomorrow. Um, you can book on the and uh, listen to the State Pension also, um, that we've got a useful resource section and if you go there, we've got all the links to what Sarah and Clare have just mentioned to the Royal London site to the money helper site.

So all the great stuff that they've just mentioned, you're allowed to see it there. So, um, brilliant. I'm gonna go back to both, both of you now and let's, let's tackle some of these questions. Well, Johnny,

They've made me head of head of questions, so I'm gonna, I'm gonna go through, this is very this is very dangerous giving me any kind of responsibility or control. So anyway, uh, we've got some fantastic questions as you said.

So the first one is, uh, Clare and you were talking about matching earlier on.

So this is a question from James. It says, can you increase the amount paid into a matching pension mid-year or does it always have to be once a year?

So that's an interesting one to ask.

And so in many schemes it would be fine just to, um, to go on to kind of your online portal, however it works in your workplace to have a look and um, to look at kind of the, the rules, basically what it says, um, and increase.

Now often what it'll show you is a kind of quote, so it'll say, you know,

I showed that example of, of the difference before and after and it will show you something like that

saying it costs you this just now and it'll cost you that. So you, you don't normally need to wait for kind of the end of your year or the end of the tax year.

You can normally do it at that point in time but check with your employer.

That's um, the top tip I would give you. Okay, we've had a related question which is from Graham and it says, I understand you can pay a company bonus directly into your pension.

Does every employer offer this and are there tax benefits for doing that? So bonus exchange is really popular and it works in exactly the same way a salary exchange. Um, but you know, it is up to your employer whether they offer that.

Normally what happens is before it comes time for your bonus to be paid, you would have to ask for, you know, it might be all of your bonus you would pay in and especially as you're guessing

I got it, yeah, yeah.

If you're getting closer to these you can take money outta pensions and that's probably, you know, a really good thing to do. Um, but yeah, it's kind of check see what your employer allows and um, and you know, there will be timescales in which you have to do that. So again, your employer will keep you out.

They'll probably send reminders when it's coming up to bonus time.

And you mentioned there about being able to choose how much goes into your pension and it will depend on your employer. There are different ways, but what they might do is say that you can for example say I want to have hundred percent of my bonus going into my pension up to £10,000.

Or I want 50% of my bonus going into my pension up to £10,000 depending on the kind of bonus that you get. So you can often say a percentage, a maximum percentage or a maximum amount or sort of both.

So you are in control in terms of working out how much it doesn't have to be all or nothing, which I think is probably worth pointing out.

So we've had a question here, um, saying I have several pensions from having had several employers.


Does it make sense to put them all in my most recent employer's pension?

What should I be mindful of and do I have to have professional financial advice?

And I think hand over to you because obviously this is what I was talking about right at the end of the webinar and I mean I just touched on a few of the reasons why you might want to consider transferring your pension and then a couple of things to be aware of and when you actually can't do it. As I said, there is a webinar tomorrow that covers this in much more depth, so do sign up for that.

But I think it also comes a little bit down to the kind of person you are because I think some people find it quite easy to keep track of several different pensions. It doesn't, you know, it doesn't faze them at all.

It's not a problem.

Other people find it a bit head melty to have different pensions with different, you know, different pension providers and actually like to be able to see something all in the same place. Now, uh, coming down the track there's something called pensions dashboard, which is hopefully going to mean that you can see your pensions in one place but that's not gonna be coming uh, on stream for another couple of years or so.

But if you're the kind of person who just wants to see everything together, that might kind of address that issue for you.

So I think it's as well thinking about the kind of issues that I mentioned, but also the kind of person you are.

Some people just find it easy to think about their retirement and picture it if they have their pensions in one place. Yeah and I think it's, I think it's worth saying that um, if you are aren't moving your pensions and they are, you know, I mean some people might have up to eight potentially different pensions from different jobs, don't forget about them. So if you move house, let the pension provider know they need to be sending information to the right place.

There's lots of money around which is in lost pensions because people haven't kept billion, isn't billions of pounds. Absolutely. Um, so you know, and you can try and find your lost pensions as well.

And again there's a session on that later this week, so that's one to watch too.

Um, but so keep them up to date.

And also things like each pension Sarah will laugh 'cause I'm always talking about death really cheery, but you know, if you die and you're in a defined pen, uh, uh, contribution pension scheme, then that would go to your loved ones or whoever, um, you nominated.

So make sure all of the forms for all of these schemes are up to date as well.

So, you know, you might have got divorced, you might have separated from someone, you might have fallen out with one of your children.

So just make sure all of the admin is up to date, um, if you do have them in lots of pensions.

Okay. Um, so we've had a couple more questions. One is, is the State Pension amount affected by how much you get from a private pension?

Easy one. This one Clare, what's the answer?

So the State Pension is, is universal. Um, and everybody is entitled to receive the State Pension.

Now one thing to mention and I'm as long as they paid enough,

As long as they paid. Yeah.

So people have to remember you have to claim the State Pension. Um, and I think Steve will be talking about this probably tomorrow.

You need your 35 years of contributions to get the full amount of State Pension.

And that's National Insurance contributions, that's National Insurance. So that's contributions or credit.

So if you've been um, a, a parent for example, then you'll be catered. Catered or maybe, uh, so yeah, so it's kind of, but State Pension is a universal benefit.

Now I think maybe what this question is getting at is that your private pensions can impact some other benefits. So I dunno. Sarah, do you want to pick up on that?

Yeah, so there, there are, there is a benefit called pension credit, which is available to people who've reached State Pension age.

And that's really designed to provide people with the minimum standard of income in retirement. So it's a little, it's a smidge under the State Pension amount and in that case if you had private pensions as well, then you'd be less likely to get pension credit because you'd be getting over that State Pension sort of income amount. But in terms of State Pension, the basic amount that we were talking about, that 10,636, then if you have private pensions, that's not gonna mean that you lose your, you know, your State Pension. I think we are running outta time, but just maybe one to sneak in, which is if you do salary exchange and reduce your National Insurance payments, will that affect your State Pension

Pension? Um, no because you will still be credited.

So after um, 2016 everybody gets, you know, kind of a year of National Insurance. If you pay National Insurance and you're over, there's kind of a minimum amount.

If you're over that then you'll be credited with a year.

Now that used to be different. There was something called contracting out, I'll leave this for uh, so Steve to talk about tomorrow Steve. Yeah. Um, but that did have an impact.

Some people who were contracted out and they paid less National Insurance.

But no, kind of moving forward, if you're working, if you earn the minimum that's required and you're paying National Insurance, then you'll receive a year's worth of contributions for that and that will go towards your 35 years and Johnny's back. I'm coming back right now. We've done all hard work.

You're gonna swamp back in. We're not gonna let you go that easy.

We won't do two more because the demand honestly, can you fit in just two more questions? Yeah, yeah, absolutely.

I'm sorry for asking two more. No, no, no, no. It was so good.

So, um, should I pick them from here or have you got

Yes, you, you, you keep going. Yeah, so there's one that's a, I think, I think it's quite simple answer but we'll see.

But which is, I'm not sure about increasing my regular contributions but could make occasional one-off lump sum payments into my pension. Is that possible?

Yes, absolutely. That's what we've got. Time. No,

Go on.

So some people want to, um, wait till later in the tax year and neither maybe bonus time.

There's different reasons why people, um, want to kind of pay at certain points now it just, you know, you have that regular amount set up, but also people might have inherited some money, they might want to pay kinda an extra 5,000 now as long as you have the earnings to support it. So back to that kinda £20,00, um, that, you know, you've got to have um, the earnings support, whatever

Your earnings amounted supported. Yes, yes. Yeah. Um, then you might want to pay extra amounts at certain points of time. So yes, definitely you can do that. And I think it's useful. I, I spent most of my life, my working life being self-employed and you know, paying regular amounts sometimes could be a bit difficult in terms of cash flow, but making lump sum payments was something when you knew how much money you had, that was easier. So one last question speaking one please. Please. Okay, please.

Alright, so this is a question from James saying can you retire early, say age 62 and then work two days a week to top up your lifestyle?

I think this is a great question.

I think this is really common now.

So what we're not seeing is people stop and work one day and being retired, people are just deciding they want to change the way they work.

People are having many different jobs, sometimes many different careers. So it might be you don't want the same kind of stress of one job, um, but if you're in a defined contribution pension scheme, but you can do is kind of take some of your pension to top up your sort of salary to what it would've been before, some of it through part-time working and some of it through taking your pension.

And it's a bit different in the defined benefit world.

So if you're a public sector worker for example, um, then you normally have to stop, take your pension.

Some people do go back to work in the public sector, but that's a, that would a whole other session, whole other webinar. But um, yeah, I think we're seeing more and more people, retirement is a flexible thing now. So we are seeing people, um, working how they want to work and working the hours they want to work.

Sorry for, and that's our last word that's gonna say all. No, thank you so much to both of you. What a great session.

It was fantastic and so many people watching so many questions.

You're very welcome. Um, so big thank you.

Will you come and join us again in Grimsby and do another show? Oh yeah, absolutely. We are on the next train.

Brilliant. We'd love that. And thank you to all of you for joining us. Well, we've loved this session today and we've loved you joining us.

Tomorrow at 10 o'clock we've got a show on the gender pensions gap.

If you haven't signed up for this, make sure you do by going to the website pension awareness day.com and we'd love to see you there. See you soon. Bye. Bye.

Death isn't a topic any of us like to think about, but it's important you have things in place for your finances and pension when the time comes. Join our pension experts Clare Moffat and Sarah Pennells as they cover tax implications, death benefits and beneficiaries. This session was recorded on 9 May 2023.

Useful links

Sarah Pennells: Hi, I'm Sarah Pennells and I'm Royal London's consumer finance specialist.

Clare Moffat: And I'm Clare Moffat and I'm the pensions and legal expert here at Royal London.

Sarah Pennells: And in today's webinar, we're gonna be talking about what happens when you're gone. Now, I know it sounds like a fairly morbid topic, but death is something that, sadly, none of us can avoid, and we know, from the number of questions that we get that people do want to prepare for what happens when they die. Now, death can be an awful time for family and friends, and it can be made worse if, for example, finances are complex, if family members don't get on or if they struggle to talk about death. Now, this week is Dying Matters Awareness Week, which is designed to encourage people to talk about death, dying and grief, so it seemed like a good time for us to be talking about this topic.

Clare Moffat: We've read every question that came in and we'd like to say a big thank you if you submitted a question ahead of this webinar. We'll be answering some of the most popular questions in the next 45 minutes or so, but if you'd like to ask a question as we go through, we've left some time at the end to answer them and we'd love to hear from you. But, as with all of our webinars, we can't answer a question that's about your specific circumstances or a Royal London policy. Now, if you'd like to leave a comment or a question, you can do so via the Slido link, but before we go any further, I'd just like to remind you that we're recording this webinar and we'll share the link to the recording afterwards with everyone who registered for it. So, Sarah, we often get asked questions about what happens to your pension when you die, but shall we begin with State Pensions? Now, just about every one of us will get a State Pension, so it's worth knowing what happens to that when you die, and it's exactly what Linda and Alistair wanted to know when they submitted their questions when they registered for the webinar.

Sarah Pennells: And it is a really good question but I think, before I answer it, I'd like to do our first poll. So, to flip the question round, do you know what happens to your State Pension when you die? So, please vote now using Slido. Okay, so just getting some votes coming in. Most people at the moment are saying they don't know, but about one in five people saying they, they do know, one in four, and, and quite a number of people saying, 'Not really thought about it,' which is, kind of, understandable. It's not one of those things that you need to think-, you necessarily think about until, you know, possibly you feel you have to. So, okay, I, I guess I would say, at the moment, it's settled down, it's saying 53% of people who voted don't know, and those results are not surprising because there isn't a one-line answer. The answer depends on when you reach State Pension age, and that, as we've mentioned, if you've joined our previous webinars, is when you can claim your State Pension, not when you retire. Now, the crucial date to bear in mind is April 6th 2016 because that's when the new State Pension system was introduced, and that system brought with it some new rules on when you could inherit someone's State Pension and how much you may be able to inherit.

So, if you haven't yet reached State Pension age or you were able to claim your State Pension on or after April 6th 2016, then your husband, wife or civil partner may be able to inherit part of what's called a protected payment when you die. So, I'll explain this a bit more with a slide. So, before April 2016, there was the basic State Pension system, and if you were employed, and for a while, if you were on benefits, then you could build up an additional pension. Now, that two-tier structure was abolished in 2016 but you were able to keep what you'd built up before then if it was more than you would get under the new State Pension system. Now, this bit that you could keep is called the protected payment and it was designed to make sure that you weren't worse off when the new system was introduced. So, some people have this protected payment as part of their State Pension, and part of that element can be passed on to your husband, wife or civil partner when you die.

Clare Moffat: But what about people who've reached State Pension age before April 6th 2016? Are they treated differently?

Sarah Pennells: Yes, they are. So, if-, we'll, we'll look now at if your husband, wife or civil partner reached State Pension age before that date because it's the age of the person-, it, it's the date the person reaches State Pension age that determines whether you can inherit any of their State Pension. So, in that case, if they reach State Pension age before April 6th 2016 or if it was after then but they died before April 26th-, April 6th 2016, then, in that case, you could inherit part of their additional State Pension. That's the pension I just mentioned that, kind of, sits on top of the old basic State Pension system. Now, I'm aware that this is probably quite head-melty and I don't want to go into more detail because I think it is quite complicated, but hopefully, that's given you a bit of an idea of the principle of what you may be able to inherit and why this date of April 6th is so important. Now, there is a really useful section of the gov.uk website that you can go to and you can put in details of your own situation, and then you'll get information on what you might be able to inherit. So, the website address is www.gov.uk/state-pension-through-partner. Now, don't worry if you don't have those details because we'll have information about this, this link and any other links that we mention in the webinar when we send out details of the recording, which will go to everyone who's registered. Now, one last thing before we leave the topic of State Pensions, which is that you can't inherit parts of your husband, wife or civil partner's pension if you remarry or form a new civil partnership before you reach State Pension age.

Clare Moffat: So, thanks, Sarah, but what about other pensions that you might have, like a workplace pension?

Sarah Pennells: Well, if you have a workplace pension, then the benefits that are available to you depend on the type of workplace pension scheme that you're in. Now, you might have heard about a defined benefit pension, now that's the type of pension where you get a regular payment. The employer promises to pay you a regular payment for the rest of your life, and that normally starts when you stop work. It's more commonly described as a final salary pension, but that's actually one type of defined benefit pension. Now, these days, you're most likely to see defined benefit pensions in the public sector. Now, the second type of pension is called a defined contribution pension, that's the type where a pension provider offers you, either individually or through your job, and in this case, you build up a pot of money and then you use that money to provide you with an income when you retire. And this is the type of pension that you're likely to be in, either through your workplace if you're in the private sector or if you've taken out a pension individually, a personal pension. Now, some people, of course, may have a mix of both of these types of pensions. So, Clare, first of all, tell us what happens if you have a defined contribution pension when you die.

Clare Moffat: Well, before I do that, to get one piece of jargon out of the way, when we talk about who might be entitled to your pension when you die, we're going to use the term beneficiaries. Now, that simply means the person or people who'll receive your pension or other assets. Now, it could be your closest family member, such as your husband or wife or partner, but it's not always the case. It could be friends or charities or trusts. Now, we've had so many questions about passing on pensions and what happens to your pension when you die, including from Alex, Agnes, Jean and many, many more people. So, we're going to take some time to explain this. Now, the next part, it's a bit tricky but it's important to know about the way that death benefits for defined contribution pensions are paid out by the pension company. Now, hopefully, this slide helps. Let's look at the left-hand side of the slide. The most common way is called 'discretion', now, that means that you can tell the pension company who you would like to receive your pension but they don't have to follow these instructions.

Sarah Pennells: Now, that sounds a bit odd, but the important point is the pension company will pay who they think you want to get your pension, and that can be anybody. Now, we had a question from Anna, who said, 'Who can be a beneficiary if I have no dependents?' And the answer is that, in most pensions, that you can choose anybody, as Clare just mentioned, friends, family, but also charities and so on. So, the first thing is that when you join a pension scheme through your workplace, you'll be asked to fill in a, a-, an expression of wish or it's sometimes called a nomination of beneficiary form, and this is the form where you put down the names of the person or people you'd like to receive your pension. Now, they are your beneficiaries.

Clare Moffat: So, so, as you've said, Sarah, you fill in an expression of wish paper form or online or via the app. Now, for example, I've said that I'd like my husband and three children to receive my pension. If I died, the company would investigate. They'd look at how recently I filled in my form and any other evidence, to find out what I wanted to happen. If my form was recent and my circumstances hadn't changed, then they'd offer my husband and children the pension death benefits.

Sarah Pennells: And, Clare, if you hadn't filled in a form, then they would still find out who should get the benefits, or if you'd had another baby or got divorced, then they could, for example, give more to your children and the new child.

Clare Moffat: Exactly, there's this flexibility, which means your pension should always be going to the right people. It also means that your pension won't normally be subject to Inheritance Tax. Now, you might think that Inheritance Tax doesn't apply to you, but passing on your pension in this way, discretion, also means that your family won't have to wait until your will, or intestacy if you don't have a will, is sorted out to offer the death benefits, so it can be paid out much quicker. If you've got an up-to-date expression of wish or nomination form or you've updated the app recently, then this shows exactly who you would like to receive your pension when you die, but, Sarah, I know you've seen some examples of cases where these forms weren't up to date.

Sarah Pennells: Yes, I have. Now, I did once see a form that was twenty years old and the man had been married at the time he'd filled it in but he'd then married another four times and had had children in every relationship. So, it was really tricky to work out what he actually wanted to happen with his pension, but the pension company investigated, and that included getting a lot of evidence from family members, from the solicitor, the financial advisor and so on, but they worked out who to pay. Now, not every case is going to be as tricky as this, but filling in your form or doing this online or via your provider's app is really important, especially if there are any changes in your life. But, Clare, you mentioned that there's discretion or, you know, the company making the final decision is the most common way for a pension provider to decide who should receive a pension payment after someone dies, but what about the other way?

Clare Moffat: So, there is a way where whoever you say should be paid is paid. Now, if we look at the slide again, this time the right-hand side, the company will pay whoever is named on the form without investigation. Now, this way means that Inheritance Tax might need to be paid if you're over the Inheritance Tax limit because it's you that's making the final decision about what happens, like you would with any other asset you would leave. Now, it means that it's even more important to keep nomination of beneficiary forms up-to-date, and if the form was filled out years ago, it could mean that, for example, and ex-spouse would receive the money. Now, if you haven't filled in the form, then the pension company will pay to your executors if you have a will. Now, those are the people who you name in your will and they have a legal responsibility for making sure that the wishes in your will are carried out.

Sarah Pennells: So, if I go back to the example of the man who'd been married five times, if his pension was set up in that way, that would have meant his first wife would have received the money and nobody else, and that's why it's not as common to see this because it's really useful for the pension company to have some flexibility about who your pension is paid to if you die. Now, on a related topic, we had a question from Jane about whether she could leave her pension asset to her children when she dies. Now, the answer to that-, to that would normally be yes, but, Jane, you might want to make sure you've filled out your expression of wish or nomination of beneficiary form recently and that it does reflect your current wishes.

Clare Moffat: Now, we've had another question from Colin, which I think's really important too. 'I've just started a new job and I've been sent two forms about what happens if I die. Are they both the same?'

Sarah Pennells: No. I suspect that one of these forms relates to the pension, but the other form is for something called 'death in service' and these are two separate benefits. Now, death in service benefit is an amount of money that would be paid out if you died while you were still working for that company, but if you left the job or you retired, then you wouldn't get a death in service payment. Now, it's most common to see death in service benefit as a multiple of your salary, so your beneficiaries might get a lump sum that's work, for example, four times your salary. Now, while death in service would only be paid out if you died while working for your employer, your pension is entirely separate. Now, it might well be that you want your death in service benefit and your pension to go to the same person or people or organisation, but that isn't necessarily the case. You might want them to go to different people. So, Colin, do make sure that you've filled out both the forms. So, before we go any further, linked to what I've just been talking about, I think, let's do another poll, and I'd like to know if you filled in both forms from your employer or whether you think you just filled in the, the pension form, death in service only or you're not sure, so please vote now using the Slido link. Okay, well, this is very impressive, over-, about 80%, so four in five, have filled in both forms, which is fantastic, so great stuff.

Clare Moffat: Good news.

Sarah Pennells: Yeah, really good news, actually. Some are-, some are not sure actually, that, that's now coming up. I said it was 80%, it's now come down to 50% but it really is worth checking, and I think it is confusing. People don't necessarily expect to have two forms but, you know, it's really worth going back and just checking to see whether you have filled in both those forms.

Clare Moffat: So, let's go into more detail now about who can receive benefits. So, you might be paying into your defined contribution pension or you might have moved your pension pot into income drawdown, so you could take a regular income from it, or you might have both. If you die, then the choices for your beneficiaries are normally the same but it is worth checking with your pension, though. Now, we're going to be talking about what happens in a fully flexible defined contribution pension scheme, so that just means it offers a full choice of death benefits but also that they can be paid to anyone, but there are some old pensions where the choice is more limited in relation to the benefits and also who can receive. So, it's something that you should check. Now, it's-, we've explained that you can choose who you would like to receive your defined contribution pension when you die but it's up to the person or, or the people chosen to pick how they would like to receive it. So, again, I think this might be better explained on-screen. So, here, we've got the person with the pension pot. Now, they've said they would like their three grown-up children to receive the money. The children are 19, 21 and 23. Now, on the person's death, the pension company have looked at the expression of wish form, they've done that investigation and then they've chosen to offer the death benefits to the children.

Now, there is a choice of how the pension money could be paid, so they could have a cash lump sum, taking it all out, they could move it into income drawdown or they could buy an annuity. Now, that would give them a guaranteed regular income for life, but that would be fairly unusual now. So, let's say the youngest child wants to take all of the money out as a lump sum because she wants to go travelling. So, the money leaves the pension scheme and it goes into her bank account. The middle child, well, they're at university, and the eldest is working and they want some help with expenses, so both don't want a lump sum, and instead, they prefer a regular income but maybe the opportunity to take more out sometimes. So, they take advice on how this should be invested from a financial advisor, and then the money is moved from that-, the parents' pot into their own drawdown fund.

Sarah Pennells: So, that's an important point, that your children or whoever your pension is paid to after you die don't have to take it as a lump sum if they don't want to, but equally, if that works best for them, then they can, and on a related point, Michael has asked a really good question, which is, 'If you leave your pension to somebody under the age of 57, can they take income from it subject to tax?' And again, this is a common query because normally, pensions can't be paid out before someone is age 55, and that age threshold is due to rise to 57 in April 2028, so five years' time. Now, when someone is a beneficiary and chooses drawdown, it works the same as drawdown for somebody who's over the age of 55, but the difference is that you can access it at any age. It is important to point out, as Clare mentioned a moment ago, that that pension money is invested though, so, as with regular drawdown, getting financial advice is important. Now, the children can take out a regular income every month, every year or not at all. Well, I hope, Michael, that that answers your question.

Clare Moffat: And another common question we get asked is about passing on pensions through multiple generations, and again, I think it's useful to look at a slide. So, if you have been a beneficiary and you chose to move that money into drawdown but perhaps you've not taken any money out or there's some money left in the pot when you die, then your fund can also pass on to who you would like to receive it too, and if they die, it can be passed on again and again and again until there's no money left. So, if you are a beneficiary and decide to put the money into drawdown, of course, you need to remember and fill in an expression of wish form too. Now, there's another point that we need to flag up here though, and again, this sounds quite complex but it's important. Putting everyone you might, theoretically, want to benefit on your expression of wish form is key. Now, again, I think this is better talked through with a slide, so let's go back to your example of the three children. If there'd been an old expression of wish form or nomination form, say it was an ex-spouse on it instead of the children, well, the pension company have decided that the children should receive the benefits, but there's a problem around what they can offer to all of the beneficiaries, excuse me. And that's because there are only two dependents that are alive, excuse me, I've got a bit of a cough.

Sarah Pennells: Yes, no, no problem. So, and that's because, as Clare said, there are only two dependents who are alive. Children under 23 and husbands and wives, including those who are separated but not divorced, and someone who's financially dependent on the member officially count as dependents. Now remember, the youngest one did a lump sum and the middle child wanted drawdown, now they're both under 23 so that's fine as dependents can be offered a full range of benefits. But the third is 23 and because they aren't a dependent of the member and the other dependents are alive, they can only receive a lump sum, so the choice is limited and that could also mean they pay a lot of tax. Now, we'll have more on tax later, so this doesn't affect who can be paid but how they get it. However, if there's an expression of wish form and all three are named on the form, the full choice is available to them. Now, this is quite complex but we've had a question from Ron that deals with this issue and hopefully should illustrate exactly what we've been describing. And he says that he nominated his wife to receive his pension when he dies, but what happens if she doesn't want the money and instead wants their adult children to receive it? Now, as Clare mentioned, Ron's wife would be a dependent and, if he wants his adult children to have all the options available, if they were to receive his pension, then he should put their names on the form or else they may be limited to only being able to take a lump sum and possibly paying more tax. Now, sometimes you see people put their spouse's name on a form and they'll say they'd like 98% of their pension to go to their husband, wife or civil partner and then, say, 1% for each child if they've got two children. What that's really telling the pension company is, 'I'd like my husband, wife or civil partner to get the money in my pension but, if he or she isn't alive or doesn't need it, then my children's names are on the form so they can access the full range of benefits.' But Clare, I've mentioned tax, you mentioned it earlier, so I think we need to move on to taxation, and we've had many questions, including one from Ken about this.

Clare Moffat: Yes, so this is something else which is, excuse me, which is different depending on whether your pension is a defined benefit pension or a defined contribution pension. Now, if you're receiving a pension from a defined benefit pension, it is taxable and it doesn't matter what age the person who died was. So for example, I'm married to a police officer, if he died before the age of 75, the pension I would receive would be treated the same as any other income and would sit on top of my salary and I would pay income tax as usual. But if you're the beneficiary of someone who is in a defined contribution pension, and if we have a look at slide six, here, then that would mean that they're still saving into their pension-, if they're still saving into their pension, or if they've moved into drawdown, if they die when they're under 75 and it's paid out within two years of their death, then for most people there is no income tax to pay. Now, if something called the lifetime allowance applied then financial advice is really important because the law on this is changing right now.

Sarah Pennells: So, if someone dies and they're 65, you know, if they had a pension of, say, £500,000, that could go to their beneficiaries and they wouldn't pay income tax at all on it.

Clare Moffat: That's right, Sarah. So back to my example, if I died when I was under 75, my husband could take my pension as a lump sum or regular income from drawdown and he wouldn't have any income tax to pay.

Sarah Pennells: The difference between defined benefit and defined contribution sounds a bit unfair but the advantage of a defined benefit pension is, you know, they're payable for the rest of your life and including someone's partner's life in that is a very valuable benefit. One of the advantages, though, of defined contribution pension is that, in 2015, we had the pension freedoms and that changed a lot about how people and their beneficiaries could access a defined contribution pension. Now, Clare, you talked about how someone dies under 75, what if they're aged 75 or over?

Clare Moffat: Well, Kenneth asked about this as he said, 'I'm told my pension pot can be left to my son and daughter free of tax if I die after I'm 75, is that correct?' Now, sadly, the answer to that is no. And again, I think it might be useful to look at the slide again, from age 75 onwards, a beneficiary will pay income tax at the right amount for their income, so that's called your marginal rate. So for example, say the member died with a pension pot of £200,000. If their beneficiary took a regular income from their beneficiaries' drawdown pot of £20,000 a year and their yearly salary was £20,000 then they would be a basic rate taxpayer because the total income in that tax year would be £40,000. But if they wanted to take the whole amount out as a cash lump sum, they'd be taking that full pension value of £200,000, which would mean they would have an income of £220,000 for that year, which would mean some would be taxed at basic rate, some at higher rate and a lot of that money would be taxed additional rate tax of 45%, or 47% in Scotland.

Sarah Pennells: And it works like taking any pension money out. The pension company will take tax off before the beneficiary receives it and you only pay tax if you take money out. So say the beneficiary chose income drawdown but didn't want to take any money out, well, hopefully, that money would grow, but the point is that no income would be paid unless they wanted to take some income out. So if you want to take money out, taking regular income is normally better from an income tax point of view. That's what you're saying, Clare.

Clare Moffat: Yes, but if you do want to take a larger amount out, so say you want to buy a house, then you can take a lump sum out. Now, in that case, even splitting it, so perhaps you would take two lump sums over two tax years, one at the end of the tax year and one at the beginning of the next tax year, well, that would mean that you might pay less tax.

Sarah Pennells: So, so just to recap, it's not the passing on the pension that could mean the beneficiary pays income tax, it's the act of taking money out of that inherited pension that means income tax is deducted. Now, and it's an important point to know about the age 75 change in tax, it's the age of the person who died that's important when we're thinking about beneficiaries drawdown. So, if the first person was to die at the age of 76 then any money taken out would have income tax deducted. But if, if the beneficiary moved it into drawdown and didn't spend it all and then died at the age of 70 and passed it onto their beneficiary, then no income tax would be due.

Clare Moffat: Yes, that's right. Now, we've been talking about what happens if you have a defined contribution pension pot or around drawdown. But of course, what happens if you've got a guaranteed income with your pension? Which some, you know, many people did before pension freedoms were introduced in 2015.

Sarah Pennells: That's right, now if you were married or living with your partner, you have bought what's called a joint life annuity and that's a product that's designed to pay you a guaranteed regular income while you're alive and then, when you die, it's make a regular payment to your husband, wife or partner. Basically, whoever's name is on the annuity aside from your own. And they will get the regular payment when you die. Now, it's normally a percentage of the amount that you received rather than the same amount, but that's something you would have been able to choose when you took out the annuity. And you'd have been able to pick an amount, generally, it's between 10 and 90% of your pension. Now, the higher the amount of pension that you said you wanted your beneficiary to get, then in very general terms, the lower the amount of pension that you would have received. However, a number of factors would've come into play, such as your age and the age of your husband, wife or partner, the beneficiary. As well as your and their health. Now, in this case, the pension-, the beneficiary would have to contact the pension provider and tell them that you died and provide evidence of this, the death certificate in order to get that pension payment. Now, we know that, in the past, a lot of people who were married or in a civil partnership or living with their partner actually bought so-called single life annuities. Now, if you take one of these out, they're only designed to pay out while you're alive. But it doesn't necessarily mean that the payments will stop when you die. Now, that sounds contradictory, but the reason is that there are different types of single life annuity. If you've taken out a straightforward single life annuity, then the payments would stop when you died. But if you've taken out a single life annuity with a guarantee then it's slightly different. These annuities pay out for a set period, a guaranteed period and it's typically something like five or ten years. And that payment carries on whether or not you're alive.

Now, as Clare mentioned, annuities used to be really popular before the pension freedoms were introduced in 2015. But these days, most people who have defined contribution pensions either take lump sums out of it directly or go into income drawdown when they retire. And in that case, as we've been discussing, the money goes straight to your beneficiaries. Well, time for a bit of a change of topic now because we've had a question from Constance, who's a nurse in the NHS and she says she's thinking of leaving the NHS after ten years' service, during which she was a member of the NHS pension scheme and she wonders what that means for her NHS pension scheme death benefits. And we've had quite a few questions about this, haven't we, Clare?

Clare Moffat: Yes, we get asked a lot of questions about public sector pensions and, as we said at the beginning, public sector pensions are defined benefit pensions. Now, with defined benefit pensions, if you die, there will normally be a regular pension which is paid to a surviving husband, wife or partner. Now, this will often be a set percentage of your regular pension and there might be a lump sum paid too.

Sarah Pennells: Now, that sounds quite simple but it is made a bit more complicated if you leave a defined benefit pension like Constance has asked about. Now, in that case, you will still get a pension and family members will still get a pension and possibly a lump sum, but that won't be as generous as if you were still a member of the pension scheme.

Clare Moffat: Yes, and it's not just when people stop working for the public sector, it also could be if they decide to stop paying into the pension but they might still be working for that public sector organisation.

Sarah Pennells: Yes, and there are similarities between all public sector pension schemes but they are not exactly the same. So if you are a member of a defined benefit pension or you were in the past, it's best to check with them. But let's go back to Constance's question and run through the death benefits available for active members. Now that means those who are still in the scheme. Those who are-, who have left the scheme but were previously members, they are known as deferred members and you become a deferred member if you stop working for an employer or if you're still working but have decided not to pay into a pension as we were just explaining. Now, the rules around particular public sector pensions have been updated over the years, but all NHS pension scheme members are now in what's called the 2015 scheme. So it will focus on that. It would get far too confusing if I tried to give details of all the older versions of the scheme, so Clare, can you just talk us through how that works?

Clare Moffat: Of course. So let's start with the lump sum death benefit. So if someone is an active member, so they haven't left the NHS or chosen to leave the pension scheme but are still working, their beneficiaries will get two times their pay as a lump sum. But deferred members will get 2.025 times the pension built up as a lump sum paid to beneficiaries.

Sarah Pennells: So, they're getting a slightly higher percentage but it's based on the pension they built up so far and not their pay. So, I think an example would work best here. So, say Constance had a salary of £40,000 a year and has built up a pension worth £8,000 a year at the date she dies. If she's still an active member, then Constance's family would get £80,000. That's two times her £40,000 salary. But if she's a deferred member, they would get £16,200, that's 2.025 times the pension she's built up so far, which we said is worth £8,000 a year. So that's a huge difference. Now, in addition to that, beneficiaries of active scheme members also get something called a short-term pension, which is around six months' pay and that's to help with the costs of bereavement. But that's not the case for deferred members. But Clare, what about the pension that her husband, wife or partner might get?

Clare Moffat: Well, the first thing to note is that the person has to have been a member of the pension scheme for two years. Now, if they have, their husband, wife or partner will receive a pension for the rest of their life. Now, this is about a third of the benefits the member's built up. So, say the member has built up £27,000 of pension benefits a year, their husband or wife would get £9,000. And that's for beneficiaries of active and deferred members, but there is an extra part which is paid on top of that only if someone dies as an active member. Now, how much depends on how long it is to go until the member State Pension age. But it is 50%, or half, of the number of years. So if an active member has twenty years until their State Pension when they die, their partner will get that third that I mentioned, the £9,000 in the example I used, plus an additional ten years of benefits. Now, remember that's paid for life and it increases each year by the consumer prices index. Now, that can be quite a difference, particularly for younger pension scheme members. Now, there's also something called dependent children's pensions and similar rules apply. And it's also really important for people in defined benefit schemes to fill in their nomination forms or expression of wish forms too. But Sarah, I think we've covered a lot about pensions, but what about wills?

Sarah Pennells: Yes, before I talk about wills, I'd just like us to do a poll, so if you can use the Slido link and vote, please, the question is have you made a will? Okay, so it's interesting, it's a bit of a, sort of, battle going between people who are saying, 'Yes, it's up-to-date,' and those who are saying they put it off. About one in four saying yes, they have a will but need to update it. At the moment, four in ten saying it's up-to-date and about 35% saying, 'No, I keep putting it off.' And I think, I think all these responses, actually, are understandable. I think it is particularly understandable about people putting it off, it is one of those things which I will be talking about in a moment. Now, the main reason for having a will is to set out how your money and possessions, which you might hear being described as your estate, is divided up when you die. Now, if you die without a will, that's called dying intestate and, if you do that, then the money and possessions that you have will be distributed according to the rules of intestacy and that could be very different to your wishes. So, first of all, apologies for the legal jargon but it, kind of, goes with the territory. But, for example, if you live with your partner but you're not married, or if you have stepchildren who haven't been legally adopted or foster children, they don't have an automatic right to inherit under intestacy rules. So, you could have a situation where a couple have been living together for twenty years, they've both been paying towards the house and the household bills, but the house has been owned by one person. Now, if they die without a will, that house will go to the closest family member of the person who owned it. Now, that could be children or parents or, if they didn't have children or parents weren't alive, it could be a more distant relative. You, as the surviving partner, would have no automatic right to inherit. Now, you might be able to take legal action for a share of the house, but there's no guarantee that you'll get anything, especially if there are children.

Clare Moffat: And Sarah, legal action is the last thing you'd want after the death of a loved one.

Sarah Pennells: Absolutely, I mean, as you say, it's the last thing you want to face. Now, a will means that your estate goes where you want it to and, when you draw up a will, you can also say who you would like to act as your executors and these are the people who ensure that the instructions in your will are carried out when you die. There are several other things you can do if you have a will. You can say who you would like to act as guardians of your children, any children you have, if, for example, both parents were to die at the same time, and if they're under the age of eighteen, it's sixteen in Scotland. Now, if you don't do this, the state will decide who has responsibility for your children. If you have any pets, you can also say what you'd like to happen to them when you have a will. Now, I mentioned about a third of people saying they put off drawing up a will and how understandable that is and I know too, all too well how easy it is to put off drawing up a will. I mean, I was a financial journalist for many years before I joined Royal London and I talked about and wrote about the importance of having a will. But even I put it off for a few years. Now, I have had a will for many years but I know I could've probably sorted it out a few years earlier. I have to be honest and say it was only when my parents died a few years ago that I think I really understood first-hand how important it was to have a will. Sorting out the financial affairs of a parent who's died is really tough, but both my parents had a will and they told me and my sister about it and, in fact, they'd given both my sister and myself a copy of it. So when I was sorting out probate for them, I did know that I was carrying out their wishes and that did make things easier for both of us. I think one of the benefits, as I mentioned earlier on, of having a will, is that you can decide who gets what and set out, you know, what happens to your business, pets and so on. But I believe that having a will is also an act of kindness for those people you leave behind.

Clare Moffat: Sometimes people don't want to think about what would happen if they died or perhaps their circumstances are complex, but taking that time to plan will really help your family.

Sarah Pennells: Yep, that's absolutely right. And I think that's especially the case as, you know, families are more complex than they were a few years ago. Now, I've talked about, you know, drawing up a will, but the law varies around the UK, doesn't it, Clare?

Clare Moffat: That's right. So, the law in England and Wales, then Scotland and then Northern Ireland, well, in relation to writing wills and intestacy, it's quite different. So, you need to make sure that any will that you write is correct for where you live. So, for example, I live in Scotland, so if I went to the shop and bought a ready-made will and it was based on English law then there could be problems. In addition, in Scotland, even if you have a will you can't actually write your children or spouse out of it. So, say I said I wanted to give everything I own to a friend, the law here says that my husband and children would still be entitled to something. And if you have any assets abroad, like a house in Spain, for example, you would need to check out the situation in that country. And inheritance tax, Sarah, tell us about that.

Sarah Pennells: Yeah, now, inheritance tax is a potential issue. So, if that's the case for you, you can also use your will to set up trusts and other arrangements to keep inheritance tax to a minimum. Now, more and more inheritance tax is being paid, and one of the reasons is because of the rise in property values. Now, we all have something called a nil rate band, which is worth £325,000, and that means that if the money in property that you leave behind is worth less than £325,000 then there's no inheritance tax to pay when you die. Now, there's also something called the residence nil rate band, and that's worth £175,000 and that means if you own your own home and you want to pass it to your child, or children or grandchild then you get an extra allowance of £175,000. Now, that kicks in even, perhaps, if your house was sold to pay for care, care home fees as well, it still applies.

Clare Moffat: So, Sarah, you've mentioned that there could be £325,000 plus that £175,000, potentially, so that's before inheritance tax would be paid, but tell us about this magic million-pound figure that we hear about.

Sarah Pennells: Yeah, as you say, I just mentioned the two inheritance tax allowances, but if a couple are married or in a civil partnership and the first person to die leaves everything to their husband, wife or civil partner, then there's no inheritance tax to pay anyway as there's what's called a spousal exemption. Now, the rules say husbands, wives and civil partners can leave as much of their assets and property to each other as they like and there is no inheritance tax to pay. Now, instead, their nil rate bands, that £325,000 I mentioned, will be transferred, which means that when the second partner dies, there can be the total of £1 million before inheritance tax is paid. There's the £325,000 that each get plus that residence nil rate band if they own their own home and have children or grandchildren. Now, but if you live with a partner, and you're not married and you die first then you don't get that spousal exemption, so there may be inheritance tax to pay if the total value of the estate, the money and possessions you leave, is worth more than £325,000.

Clare Moffat: And that's back to what you were speaking about earlier, for people who live together and aren't married, then they need to understand that there are differences in the law.

Sarah Pennells: Yeah, now, we mentioned at the beginning, which might feel like quite a long time ago, that your pension isn't normally covered by your will but your house or flat may be, and if you own it in your name only you should definitely state in your will what you would like to happen to it. If you own it with somebody else such as your husband, wife, partner or friend, then it may or may not be covered in your will, it depends on how the ownership was drawn up when you bought the house. So, typically, if you're married you might own your home as something called joint tenants, and in that case, your share of the house will automatically pass to your husband or wife if you were to die. It wouldn't matter if you had a will or if your will said something different. If you owned it jointly in a different way, that wouldn't be the case. Now, in Scotland, the principle is the same, but the terminology is different. So, Clare, having a will is a good idea for most people, but how do you actually go about getting one?

Clare Moffat: Well, you don't have to use a solicitor or a professional will writer to draw up a will, but many people do. Now, you'll normally have to pay a minimum of about £150 to get a solicitor to draw up a simple will for one person, but it could be more than that if your situation is very complicated if there are two of you. Now, often there are free wills months and solicitors who will draft a will for a donation to a charity or other ways of reducing the costs, so it's definitely worth watching out for these. Now, we've got a guide to making a will on our website and it includes how to get one made, and we've also got a guide to what you can put in your will.

Sarah Pennells: And as I mentioned earlier on, we'll include those links when we send out the recording to this webinar to everyone who's registered. So, just before we, we finish, we've mentioned you can put details into your will to make things easier for your loved ones, but it's also to have details about lots of other things in one place. So, we have a document which is called, 'When I'm Gone,' and this basically goes through the kind of information that might be important to set out for your family, and you could just put all this information in one document.

Clare Moffat: Yes, Sarah, and I think this is a great idea. So, in my house I do all the financial stuff and I realised that my husband would have to search for paperwork if I died, I know where it all is but he doesn't. So, we both filled in these forms, it's got names and phone numbers for our pensions, life insurance, banks and so on, so that if the worse happened it just makes one admin job a bit easier. Now, it's also got space for things like funeral wishes. Now, you can put this in your will but things change and, and in mine, I put things like songs I would want because they mean something to me, but in a few years' time I might change my mind about that. Now, we've covered a lot in the last 40 minutes or so, but we do have time for a few questions now, but before we go we have one last poll, which is for what topic would you like us to cover in the next webinar?

Sarah Pennells: Okay, so please vote using the Slido link, as normal. Okay, so this is kind of-, this is one that's a fast moving poll, we're getting some-, I, I, I'll, I'll come back to it right at the end just before we leave because it's taking a bit of time to settle down, but I think we'll take a couple of questions now. The first one is from Alexandra and, I think, Clare, you've covered this but it's really good to reiterate it. So, what if I don't have a husband, wife or civil partner? What does that mean, then, for her pension?

Clare Moffat: Yes, so again, it's-, you know, we mentioned that there are some very old styles of pensions around where they're not quite as flexible, so it's worth checking that first of all. But now most pension schemes are quite flexible and it means you can have whoever you would like as a beneficiary. You know, they've got to be a person or a company, so a charity or a trust. I have once seen somebody try and leave their pension death benefits to a parrot and that can't happen, you can leave money to someone to look after your parrot but it's got to be a living individual or a company, but there's no other rules about who it can be, it can be friends, family, anybody.

Sarah Pennells: Yep. As you say, you can't actually leave money directly to your pets, they're, they're counted as chattels, weirdly. But I know somebody who apparently wants to leave some money to her ten hens, but there we go, that didn't happen. Anyway, another question which is from Paul, saying, 'What happens if I'm in drawdown and I die? Does my wife inherit the remaining policy free of tax?'

Clare Moffat: Well, I think that's back to that question of it, it depends how old Paul is when he dies, so-, and also the fact that his wife can choose what to do with it. So, if Paul is under 75 and his wife receives the pension death benefits she can choose to take that money out, all of it out, she can take it as a cash lump sum, she can move it into drawdown and she can take a regular income or some money one year and not any money for a few years, or not take any money out. But it's really, you know, important about the age that he dies. So, if he's under 75 then that money will be income tax free, if he's over 75 then his wife would pay income tax for any money that came out of the pension. So, if she didn't take money actually out, then there wouldn't be any income tax to pay, but if she did take money out and he died at over-, 75 or over then there would be income tax to pay.

Sarah Pennells: And, as you say, really good to reiterate both that age but also that it's the, the act of taking money out that triggers the income tax, not the act of having the money passed on. So, a question now from Graham, saying, 'Will my private pension automatically become part of my estate on my death or do I have to make special arrangements?' Well, in most cases, I mean, it's not really going to be part of the estate but, as we said at the beginning, the pension sits outside of the estate. Anything you want to add to that, Clare?

Clare Moffat: No, just, you know, as we said, for most pensions that's how they're set up, they're set up under discretion so they're not part of the estate. Just there are some pensions which are part of the estate, so again, it's kind of one to check, but in most situations, pensions would not be part of your estate on death. So, you can have your will and say in your will you left everything to your wife, you could have your pension leaving everything to your children, for example, so, you know, it can be different, they can be the same.

Sarah Pennells: Yep. And there's sort of a, a related question from Annette, saying, 'If I die would my beneficiary get everything left in my private pension pot?' And I noticed you said beneficiary and, I mean, you don't need to leave your money, your pension to one person, do you? You can split it between two, three, four if you want to?

Clare Moffat: Yeah, that's right, you know, as I mentioned, mine's split between four people. And part of that's because, you know, my-, if I died now, I think I'm quite young, I would want my husband to remarry but I would quite like my children to keep a hold of some of my pension money because he might remarry and then if he died first then maybe his new spouse would get some of the money that he had. So, it's about, kind of, thinking longer term what you would like to happen as well. If, you know, this was in, kind of, 30 years' time maybe the chances of him remarrying again would be less. So, so it's worth thinking about things like that as well, so who would I like to receive my money, what might happen? What age am I? There's lots of different things to think about, but splitting it up amongst various beneficiaries is really common now.

Sarah Pennells: And we're saying that, you know, it obviously doesn't have to be a husband, or wife or child that you leave your pension to, but we've got a question here from Robin, saying, 'I would like to leave my pension to my grandson who is eleven years old, anything to be aware of?' So, what could Robin-, what should Robin think about?

Clare Moffat: So, that can be excellent planning because perhaps other assets under the will are going to different people and, you know, as we mentioned, if you-, you can leave it to whoever you want. We don't know how old Robin is, if Robin's over 75 then perhaps if you're leaving it to a grandchild then money can be taken out. Now, there would be financial advice given on their behalf as well, so say they were moved into drawdown, perhaps the money could be taken out to pay for things like school fees or, you know, when they turn eighteen, they might use some for university funding. Now, of course, just be aware that, you know, when people do reach the age of eighteen, then it's up to them what they do with the money and they could take all of the money out and spend it on whatever they wanted. But that's back to that situation over you can say who you would like to receive the benefits on your death but it's up to them to choose what happens with them, and as soon as they hit eighteen, or sixteen in Scotland, then it's their choice of how they take that money out.

Sarah Pennells: Okay, so we've had a question from Silvia, which is saying, 'If I don't have a partner or husband then can my nearest relative inherit, for example, my sister or niece, can they inherit my protected pension?' Now, that's-, I started off the webinar talking about your State Pension and what happens to your State Pension when you die and the elements of that that your husband, wife or civil partner may be able to inherit, depending on the age that you reach State Pension age. Now, sadly, it's not the case that you can pass this on to another relative, it's, it's your husband, wife or civil partner who can inherit, it's not the case that other family members can inherit. But obviously, as we've been discussing, with other pensions then, then you can decide who the beneficiary is. Clare, anything you want to add to that?

Clare Moffat: No, I think that deals with everything.

Sarah Pennells: Okay. So, we've got a question now from Lily, who says, 'I'm just about to get married. Do I need to tell my pension provider for the death benefits?' I think the short answer is yes, but you'll probably want to-,

Clare Moffat: Well, I think that, that depends.

Sarah Pennells: You might want to expand on that, yes.

Clare Moffat: Well, because it could be that Lily has lived with her partner for a number of years, so they might already be on the expression of wish forms. So, if she has already, you know, written their name down on that form or put them on the app, then the same, you know, nothing's really changed. But if Lily hasn't had that person as one of her beneficiaries and she wants to have them as a beneficiary, then it's a good idea to have a look at the form. And sometimes it's just a good idea to fill in a new form or update the app even if it's the same information you're putting, because if a significant event has happened it's sometimes just, kind of, making that point and showing that this is a recent update. Because it could be that Lily doesn't want her new husband to receive any of the death benefits, so, you know, it's kind of worth having an update to that. And even sometimes, you know, just kind of writing a bit of a story on the form or, or however you do it, to explain to the provider what you would like to happen.

Sarah Pennells: Okay. We've got a, a-, we've got quite a few more questions but I'll try and whizz through a couple of them in the next, sort of, six or seven minutes. So, here's a question from Shaun, 'In the scenario whereby you and your partner (100% beneficiary) were to die in the same accident and you have no children, who receives your defined contribution pension on death?' And Clare, I think you covered it but it's always good to, kind of, go over this, you know, just to emphasise it again. So, what's the answer there?

Clare Moffat: So, it might be worth thinking about who you might want to receive benefits in the event that your partner's no longer there. So, you've said that-, Shaun said that they're a 100% beneficiary, it might be if there are nieces, nephews, friends, other people you might want to receive, you could put-, do you remember we, we spoke about the fact that you could have someone as, kind of, 98%, 1%, 1%, so you could have instead of 100% beneficiary being the partner you could have them as 98% beneficiary and then 1%, perhaps, for a friend and 1% for a niece or nephew. Now, again, what that's telling the company is that if the partner is alive, then you do want them to receive the benefits, but if the partner isn't alive, it means that those other beneficiaries-, well, first of all, you're giving some names of other people but it's also giving, you know, them the choice of all of the benefits you would want. So, it might be worth thinking about who else you might want to benefit if your partner was no longer alive or actually didn't want the benefits.

Sarah Pennells: Okay, so we've got a question here, a, a tax question from Kenneth, 'How do I leave my pension pot to my children without having to pay tax on what they receive?' And again, really useful to go over it-, go over again and that age 75 cut-off.

Clare Moffat: So, the rule is in relation to age and it is very clear that if you die when you're under 75 and it's a defined contribution pension scheme-, because remember, if it's a defined benefit then there will be income tax paid even if it's under 75, but defined contribution then there'll be no income tax payable. If you die when you're 75 or older then there will be income tax payable. Now, the way that they wouldn't pay income tax even if you died when you're over 75 is if they don't take any money out of the pot, or they could make sure that they take it within their personal allowance or, you know, they stay a basic rate taxpayer. So, again it's really crucial at these points, especially with larger pots, to take financial advice, but the, the rules on income tax are very specific about-, it's about age, so it's from 75 onwards that income tax would be payable when you take money out of that pension pot.

Sarah Pennells: Okay. I think we'll have one more question, maybe, before we draw to a close. And this is from Adam, who says, 'Why would my pension be subject to inheritance tax if I chose direction instead of discretion on my nomination of beneficiaries?'

Clare Moffat: Now, it's to do with the fact that you are directly saying what's going to happen with that money, so it's just the same as if I said what was going to happen to a house, that would, you know, be subject to inheritance tax. If the pension company's making the final decision, it's breaking a chain, effectively. So, what they're doing is, although there's an expression of wish form from you saying what might happen or what you would like to happen, the company makes the final decision and that takes it out of the realm of inheritance tax. So, it's all about, kind of breaking that chain, almost, and just it's not going to be like any other asset that would be under your will which then could be subject to inheritance tax.

Sarah Pennells: Great stuff. Well, thank you very much, Clare, and thank you very much for all the questions that you submitted. I'd just like to go back to the poll before we close the webinar, so again, thanks to everybody who voted in the poll, I really appreciate it. So, the topic that's come out on top is pension options at retirement and on ill health, with 44%, financial advisors, what they do and how to find them was the next most popular, and then making contributions to my pension, and then finally marriage, divorce and pensions. So, we'll definitely use that to inform the pensions that we do-, the webinars that we do, sorry, later on this year. So, thank you very much indeed for joining us, thank you, Clare, I'm glad your voice managed to hold. That is all that we have time for. Thank you again for all the questions that you submitted in advance and the ones that we received during the webinar. Now, as I mentioned a couple of times during the webinar, we will be sharing a link with the recording of the webinar in the next few days. And that will also include links to the gov.uk website that I mentioned and also to the wills articles on rl.com, and that 'When I'm gone' document that both Clare and I spoke about. So, look out for that link but, in the meantime, a huge thank you for joining us today and for taking part in the polls and submitting questions. Thanks very much.

Listen to our pension experts Clare Moffat and Sarah Pennells as they cover some pension basics, find out where your money is invested and how you can be making the most of your pension. This session was recorded on 7 March 2023.

Clare Moffat: Hi, I'm Clare Moffat and I'm Royal London's Pension and Legal Expert.

Sarah Pennells: And I'm Sarah Pennells and I'm the Consumer Finance Specialist here at Royal London. And in today's webinar we're going to be talking about how to make the most of your pension. So we'll start with a quick recap of the basics of what a pension is. We'll talk about how much to save in your pension and importantly how your pension can save you tax. Now, we had a staggering 546 questions submitted ahead of this webinar so, first of all, a huge thank you if you did submit a question. But obviously we're not going to be able to answer all of them in the next 45 minutes or so. Now, Clare and I would like nothing better than to talk about pensions non-stop for two days, but you may have other things to do.

Now we have read every question, and what we're going to do is answer some of the most popular questions in this webinar, but we would still like you to submit some questions and I can see some of you already have been. We have left some time at the end to answer questions that come in. As with all of our webinars, though, we can't answer your specific circumstances and we can't talk about a Royal London policy. So if you have a comment or a question, please make it using the Slido app or link now. One more announcement to make which is that a reminder that we are recording this webinar and we will be sharing a link to the recording with everybody who registered in the next day or so.

So let's start with the basics, Clare, let's get on with it. What is a pension? And by that I mean what makes something a pension rather than a different kind of savings or investment plan?

Clare Moffat: Well, it's a really good question. The purpose of a pension is to provide money when you've stopped working or perhaps before this, but you must be 55 or over currently to be able to take out any money from your pension. Now that age is rising to 57 by April 2028. Now a pension is different to other types of savings or investments plans because of the way it's taxed. Now we'll be talking about how pensions can save you tax later on, but in broad terms the government gives you a tax top up on the money you save into your pension, and you're allowed to take out some money tax free. Now under the rules you can only take money out of your pension before the age of 55 in very limited circumstances. So normally if you're very ill or perhaps in certain specified jobs where you are allowed to retire early.

And it's those rules that make a pension different from something like, for example, a stocks and shares ISA.

Sarah Pennells: So that's what a pension is but I suppose we should explain about the two different types of pension as well.

Clare Moffat: Yes, you might have heard the words, 'Defined benefit.' Now that's the type of pension that makes a promise to pay you a regular payment for the rest of your life. Now that would start when you stop working. A final salary pension is one type of defined benefit pension but there are other types as well. You might have heard of, 'Career average,' as well. Now if you retire and you have a defined benefit pension, well it's almost like carrying on getting your monthly salary, except you'll get less, of course. And you can take some tax-free cash too. Also, if you have a husband or a wife who is alive longer than you, then that payment will normally carry on for their lives too. Now these days you're more likely to see defined benefit pensions in the public sector, although lots of people have some definite benefit pensions from the past.

The second type of pension is called a defined contribution pension. So that's the type of pension that pension providers offer to you individually or through your job. Now these are pensions where you build up a pot of money and then you use that money to give you an income to live on when you retire but you can take out some money before you stop working if you want to.

Sarah Pennells: Now you may have noticed that we haven't mentioned the State Pension and there's a very good reason for that. That's because in our last webinar in December we spent almost an hour talking about and answering your questions on the State Pension so there's a link to that webinar on this page. Now before we go any further I think it's time for our first poll. So, what we'd like to do is ask about the type of pension or pensions that you have. Whether you've got defined benefit pension or pensions, defined contribution, a mix, or you're not sure. So please vote using Slido.

Okay so at the moment, Clare, 'Not sure,' is actually the most popular answer, so 36-, it's changing as I'm speaking but 36, 35% saying not sure. About a similar number, 32% is saying defined contribution and about 27% saying both. Only 4% defined benefits so-, I mean I think it's interesting that so many people aren't quite sure what kind of pension or pensions they have. Maybe not that surprising because many people may have had pensions over a number of years and may not have actually checked for a while.

Clare Moffat: And that's right, especially if you've left an employer. You might remember who you've worked for, you probably will remember who you've worked for, but you might not remember the type of pension scheme that you had and it's probably only as you get closer to retirement you think about that a little bit more. And, you know, we will still see people that do have a mixture of both. In years to come that won't be as common, but you know, it is more common now. Now of course the reason we asked this question, well it's because we are going be mainly focused on defined contribution pensions and some of the key features in relation to them, rather than defined benefits. One of the key features with a defined contribution pension is that you're in control of how your pension contributions are invested. But there's a lot of confusion about what exactly happens to your pension money and it's something we had a lot of questions about.

Sarah Pennells: Yes, we absolutely did. Including this question from Philip, who says he's just joined his employers pension scheme and how does he find out where his money is invested? Now we will answer your question, Philip, but I think before we do that we'll do a quick explainer of what happens to your pension money. So, the money that you pay into your pension and money that comes from your employer into your pension, if you're in a workplace pension scheme, together with the government tax top up of tax relief, that's all invested, all invested into-, in funds. And these funds in turn invest in different assets. So they may buy the shares of a range of companies for example, or they may buy company bonds which effectively means loaning the company's money. Or government bonds if they're buying them from the UK government, they're called gilts. Or other assets including things like commercial property. If you're in a workplace pension-, and this is a really important point, unless you actively decide where your pension money is invested, then it will be put into something that is called the default fund.

Clare Moffat: Yes, the make up of these default funds-, well it varies from one pension scheme to another. But the idea is that it meets the needs of most of the members of the workplace pension scheme. Now the vast majority of workplace pension scheme members have their money invested in the default fund. So if you're happy to have your money there then you don't need to do anything at all. But you don't have to keep your money in the default fund.

Sarah Pennells: No, that's absolutely right. So, you can switch money that's in your pension to other funds within your workplace pension if you prefer and you can choose those funds. So that's something that you can do yourself and switch some or all of your money. Now if you want to switch funds within your workplace pension, then you won't normally be charged if you're doing this. I think it's really important, though, to think about if you want to switch your pension money, about the risk that you might be taking in terms of the funds that you might want to move your money too, compared to the risk that might be associated with where your money is at the moment. And I think that risk is one of those things that-, it can be quite tricky to talk about when we're thinking about it in relation to money. How much risk someone might be comfortable taking.

Now the idea behind taking more risk, putting your money into a riskier fund, is that you have the potential for higher growth, but you do also have the risk that there's a higher chance that your pension will lose money as well. So, there's that thing around the comfort level that you have about the risk that fund or funds might be taking, but it's also important to think about how far away you are from retirement when you might want to access your money. Because that could also affect the amount of risk that you're actually able to take. And this is why it's an important decision and it's a really good idea to talk to a financial adviser, this is something they can really help you to think through and talk through. Now we do know that not everybody has a financial adviser so we've got an article on our website about how to find a financial adviser. It talks about the, kind of, different questions you might need to ask or think about in your own mind and also some adviser directories.

We've also got information on our websites about pensions and investment funds, but there's also an article on the MoneyHelper website which is government backed website about pensions and investment funds and the address of that website moneyhelper.org.uk

Clare Moffat: Philip wanted to know how he could find out where his money is invested, so what's the answer?

Sarah Pennells: Well, there are three different ways that you can find out where your pension money is invested. So, first of all your annual pension statement so, you know, the statements get sent once a year as the name implies, and they have information about how much you've paid into your pension, how much your pension is worth but also where it's invested, the different fund or funds that your pension money is invested in. So that's a good place to look. Now if your pension provider has an app then they may list the funds that your pension money is invested in and that can be really hand if you're the kind of person who wants to check on your pension you can do it, obviously, whenever you want to. But also if your pension has an online portal then you can login there and, again, as well as your contribution details, it will have information about the investment funds that your pension money is in.

Right time for another poll, I think. So, this time-, we've asked you about the kind of pension or pensions that you may have, this time we'd like you to tell us whether you know how much you're saving into your pension each month. So please vote now.

Okay this is really interesting, so we're getting at the moment about half and half of people saying they know to the penny, and people who are saying they have a rough idea. About one in ten, nine percent, are currently saying, 'Not a clue,' and about five percent are saying they're not currently saving into a pension. Is this what you expected, Clare? What do you take from these results?

Clare Moffat: Yes, because I think some people will know the fixed amount that's going in, but some people might-, it's a-, it might be a percentage. So, and especially if you've got, kind of, fluctuating salary, perhaps. You know, different salary every month then there could be a different amount going into your pension every month, but it's really encouraging to see that people-, you know, a lot of people do have a rough idea as well as people, kind of, know to the penny as well. And you know, as you say it's really interesting because even if you do know exactly how much you're saving into your pension every month, you might not know whether that's enough for retirement. And that's something we had a lot of questions about, including one from Anthony who asked how much he should be paying into his pension so that he has enough to live on. Now Sarah, we know money is really tight for a lot of people at the moment, so how much should people aim to pay into their pension?

Sarah Pennells: It's a really good question from Anthony, and as you said, we had some others who also submitted a very similar question, so thanks for that. And there isn't an answer, unfortunately, in a way, of one, sort of, single figure of, 'This many pounds a month.' I think if you are thinking about how much to save into your pension, then it is really helpful to think about your end destination. So, in this case, think about retirement, think about the kind of life that you'd live in retirement and really think about it in some detail. So how will you spend your time when you're not working, or when you're not working so much? Are you the kind of person who wants to travel a lot? Do you want to travel to far flung places? Or are you somebody, 'That just isn't important to you'? Do you want to take up some new and possibly expensive hobbies, or are you happy with your existing possibly expensive, possibly not, have-, hobbies? How do you imagine spending your time? A really big important expense is your mortgage or rent.

Will you still have a mortgage when you retire? If so, what's that likely to be? How many years will you have that for? If you're renting, likewise. Is your rent going to be similar to now? Could it be less? Is it going to be more? Even if you don't have a mortgage, if you're going to be retiring and your mortgage will be fully paid off, is your home the kind of property that could be a money pit in terms of repairs and improvements. Or even if it's not the case, are you the kind of person who likes to redecorate regularly and spend money on your property or does that really leave you cold?

The next stage is to think about when you retire. And again, I think it can be helpful to shift how you think about stopping work, because I talk to lots of people who say, 'You know, I really love my job, I don't really want to retire until I'm in my late 60s, even 70s.' But sadly not everybody is going to be able to carry on working until their late 60s or 70s, even if they want to. And retirement isn't just about, 'This is the life you have after you decide that you have to stop work,' retirement enables you to have a life without having to work to pay the bills. You can stop work if you want to, or you can carry on working, it's up to you. But what retirement enables you to do, is to not have to work to pay those bills.

Clare Moffat: So, what about those people who love numbers? Should they start somewhere else?

Sarah Pennells: Yes, that's a really good point. And in that case I think the starting point is to look at what you'd have to live on if you didn't have any pension at all. So that's going to be the State Pension and once you know what the State Pension will pay you, then I think you can work out whether that's enough to give you the kind of life you'd like in retirement or whether you're going to have to have more into your pension to give you a good standard of living in retirement. So, let's talk about the new State Pension. That is currently £9,660 a year, per person if you have a full National Insurance record. And that's gonna rise to £10,636 from April the 6th. Now, that works out at £805 a month, currently, or £886 a month from April. Now, if you joined the State Pension webinar, you will know that I tried to live on the State Pension for a week last year, along with some of our customers. I took the State Pension challenge. And I have to be honest and say I didn't find it easy. Apart from having to watch my spending even more closely than I currently do, I realised that there was just no stack in the system, certainly for me, and that was quite stressful.

And I did the challenge in summer, when I didn't have the same, kind of, you know, heating and winter bills that we're all facing at the moment. But even if you are happy to live on the State Pension amount on its own, or largely on its own, then there's a question about whether you're happy to wait until the earliest age at which you can get your State Pension before you stop work. So, currently, the State Pension age is 66. So, that's when you can get your State Pension. But it's rising to 67 and is, by 2028, and is due to rise to 68 later on. So, the two questions that follow up from that, how much more do you want to have saved in the State Pension amount? And how much earlier do you want to retire than the State Pension age, and when you're allowed to claim your State Pension?

Clare Moffat: And should people be focusing on the age they want to retire or the type of lifestyle that they'd like to live?

Sarah Pennells: Well, I, I'd personally say both. I mean, I think if, if you're the kind of person who wants to have a really comfortable lifestyle, you know, you want to travel a lot, you want to eat out, you want to, maybe, leave money for your children or grandchildren, then that's going to have a really big impact on how much you need to save for your retirement, compared to somebody who doesn't have those, doesn't really want to live like that. But, obviously, it will also be affected by when you want to retire. You know, whether you want to retire at 55 or at State Pension age. Obviously, as I mentioned, one of the biggest expenses is going to be your mortgage or rent. So, that's going to be a, a huge one to factor in. So, I think it's maybe time for another poll, Clare.

Clare Moffat: Yes. We've been talking about how to think about what you might need in retirement. So, let's think about that in a little bit more detail. So, if you were thinking about your life and retirement now, which of these is the closest to how you imagine it? Now, obviously, everyone's got very different ideas, but try and pick an answer that's closest to what you think a good retirement looks like. Okay. So, lots of people want three weeks' holiday in Europe and replacing their car every five years. So, I'm not surprised by that. Are you, Sarah?

Sarah Pennells: No. I think we've-, this is a really interesting one because I think when you ask people to think about their retirement and you give them a choice, which is, kind of, basically, not being able to spend so much money on food, not being able to spend so much money on clothes, on, on birthday presents, on, you know, whatever it is, and, and not much on holidays or transport, not surprisingly, people do go for the more, sort of, comfortable end, in terms of retirement. But, yes, so it's settled on 50% at the moment saying, you know, basically, 'I'd like this three weeks' holiday in Europe and replacing my car.' About four in ten, though, are saying, 'Actually, I'd be quite happy with two weeks' holiday in Europe and I'm not so bothered about replacing my car that frequently.'

Only 4%, so fewer than one in twenty are saying, 'No car and holidaying in the UK.' And it's-, the reason we ask this is that there's a really useful website called retirementlivingstandards.org.uk which we've added the link to, and that website will really tell you how much you need, as an annual income, depending on the kind of-, kind of retirement that you'd like. So, it's based on independent research, and if you go to the website you'll see, next to each different income level, what that will buy you. And I think it's important to say that the numbers on the retirement living standards presume, first of all, that you don't have any housing expenses at all.

So, no mortgage or rent. And they presume that any money you have from your pension is, has been, the tax has been paid, and any money that's coming out of your pension. Now, if you're happy with what they call a minimum lifestyle standard of living, and we found that only 4% of people in our poll were, but if you live on your own, then you'll need £12,800 a year. And to give you a bit more of an idea of what that includes, you'll be able to have a weekend and weeks' break in the UK every year. Spend about £54 a week on food, and up to £60 a month on clothes and shoes. But as we've said in the poll, you wouldn't be able to run a car.

Now, for a moderate lifestyle, you'll need an income of £23,300 a year for a single person. For that, you'd spend a bit more on food. £74 a week. £65 a month on clothes and shoes. Go on holiday to Europe for two weeks of the year. And if you want the comfortable lifestyle, and we've found that about half of you said, 'Yes, please.' Then you'd need an income of £37,300 a year for a single person. And, as well as the car that we mentioned, three weeks' holiday in Europe, but also, you can afford, as well as spending more money on things like food, and clothes, and birthday presents, you'd be able to replace your kitchen or bathroom in your home every ten or fifteen years.

Now, I do think this is one thing that's really, really good about the retirement living standards website because you can just go through and look at, actually, what you'd like. And they're very, sort of, tangible examples. And I think it really does help to bring to life what retirement at different income levels could look like.

Clare Moffat: And if you're part of a couple, those figures rise, but they don't double. And that's because it's cheaper for two people living together than for two people living on their own. So, for a moderate lifestyle, instead of £23,300 pounds a year, you'd need £34,000 for a couple. And you can see on screen there the number for minimum and comfortable too. Now, you might be wondering how much you need to save to get to those amounts, and, and that depends on a lot of factors. There's a really handy pension calculator on the MoneyHelper website that Sarah mentioned earlier. And it looks at, for income retirement, but then looks at your salary now, pension contributions that you're making, your employer's making, what your State Pension age will be. And it works out if you'd have a shortfall.

So, you plug in the numbers. You'd like to retire at 65, for example, and it helps you, kind of, work out if that's achievable or what you would need to do to help that. But Sarah, we know that some people are really struggling with the cost of living, so they might be thinking about stopping or reducing their pension contributions. So, so, what should they think about?

Sarah Pennells: Well, you know, you might expect someone from a pension company to say, 'Don't think about stopping or reducing your pension contributions.' And, on one level, that, sort of, is what I'm going to say and, and the reason is that I think the first reason is that we know most people don't save enough money for their retirement. Now, that's not a judgement. That's just what the research shows us. So, they don't save enough for the, kind of, you know, a good standard of living when they stop work. The second reason, though, is that if you're employed, then you're in a work, and you're in a workplace pension, then, that means you'll be giving up your employers' contributions into your pension.

But also, tax relief, the tax top-up from the government as well. Now, we know that some employers, quite a number of them, won't just contribute on a, kind of, standard level or basis. They will do something that's called matching or matched contributions. And this means if you want to pay more into your pension, they will match the, the money that you pay in. Now, obviously, I'm very aware we're in the middle of a cost of living crisis, and we know that millions of people are really struggling with day-to-day bills. So, this may be not the time you're thinking of paying more money into your pension. But it is worth checking with your employer for, you know, when those bills do start to come down and you may find that you have some spare money because, as I've said, they well match your contributions.

Now, if you are struggling to pay your household bills, then it definitely could make sense to reduce or pause your pension contributions. I did mention, there, that one of the reasons not to stop paying into your pension is the employer contributions but also the tax relief. And we got a lot of questions about tax relief, including ones from Laura and Richard and they want to know, 'What is tax relief? How does it work?' So, Clare, what's the answer in more detail?

Clare Moffat: Okay. So, let's have a look on screen about how, how tax relief works. Now, it's worth seeing, at the outset, that the principle of tax relief is the same across different types of pension schemes. But the way it works in practice can vary. Now, if you pay £80 into your pension, and you're a basic rate taxpayer, then the government will top that up by £20. So, £100 will go into your pension. Now, if you're a higher or additional rate taxpayer, then you'll get extra tax relief. So, an extra £20 and an extra £25. You'll get at the higher rate of tax, and so, that brings the tax relief. You can see the example for a higher rate taxpayer there.

But, and, you know, this is an important point to make, you may either get that extra tax relief, so that extra if you're a higher or additional rate taxpayer automatically, or you might have to claim it back from HMRC. So, if you're paying into an individual pension or, or some types of workplace scheme, then you'll get that same 20% or 25% tax relief. Sorry, same 20% basic rate tax relief, but you'll have to claim that extra twenty or 25% from HMRC. Now, you can do this in a tax return, if you fill one in, or you can phone them up. Don't miss out on money in doing this, and lots of people do miss out on this.

So, it's one to be aware of. However, some employers operate slightly differently. So, if they operate a scheme called salary exchange, or sometimes called a salary sacrifice, and we're going to come back to this a little bit later on about how that works. Now, your pension contributions are taken off your salary before tax is paid. Now, in that situation, or if it's a type of pension like a, a public sector pension scheme, or another type of scheme where it's also taken off before tax, then if you're a higher or additional rate taxpayer, you don't need to claim anything back because you're getting the benefit of the full amount of tax relief immediately.

Sarah Pennells: So, I think the message there is if you are a higher or additional rate taxpayer, then it's important to check if you do have to do something to get all that tax relief back or you might be losing out. Now, if you're in a workplace pension scheme, then your employer has to pay something into your pension as well. So, you have the benefit of the tax relief and that money from your employer. But Clare, one of the other features of a pension is that there are limits on how much you can pay into it each year. Now, pensions aren't the only kind of investment that have these annual limits, you know, ISAs do as well, for example. But how does it work if you have a pension?

Clare Moffat: Yes. And we've had lots of questions on this as well, including from Michelle who asks, what's the maximum lump sum she can pay in. So, for most people who are employees, the maximum that they can pay into their pension and get that government top-up tax relief is their earnings. So, if you earn £20,000 a year, then, theoretically, the most that you could pay in and get tax relief is £20,000 a year. But if someone isn't working then they can still pay £2,880 a year into a pension, and they'll get a 20% top-up as well. So, that means they would have £3,600 going into a pension.

Now, anyone can have a pension, even children. Your pension provider might have an app that shows you the amount of tax relief that you're getting from the government, and that's interesting to look at, but one thing to mention is that if it's a salary sacrifice or a salary exchange scheme, it might not be as obvious to see on an app, but you are still getting the benefit of the tax relief because you're not paying tax on that money.

Sarah Pennells: But if you're watching this in Scotland, then there are-, there are different tax rates, aren't there?

Clare Moffat: Yes. There are different rates of tax in Scotland, so you might be paying more tax than in the rest of the UK. Now, if you're a higher rate or an additional rate taxpayer, then these tax rates are increasing, again, on the 6th of April this year by 1%. However, the more tax you pay, the more relief you get. So, that actually means more money in your pension. So, in Scotland, if you're a higher rate taxpayer, you, you will be paying 42%, but instead of getting 40% tax relief, you'll be getting 42% tax relief.

Sarah Pennells: Now, Clare, you mentioned salary sacrifice a moment ago. And again, we had quite a few questions on this, including one from Kate, who wants to know, 'Is salary sacrifice something that's always offered?' I think before we answer that, well, just to explain a wee bit more about salary sacrifice. Now you, you described it as salary sacrifice or salary exchange. It's, it's known as both of those things. And, in a way, salary exchange is a-, is a better description because what you do is you give up, essentially, or exchange a percentage of your salary and that money is then paid into your pension by your employer. They pay that money into your pension on your behalf.

So, you're not actually sacrificing it because you are exchanging it for something in return. Now, doing it this way means that you can save National Insurance which is, of course, just another tax. And that means more money can go into your pension. So, you know, you could either, if you switched into a salary sacrifice, you could either carry on saying, putting in the same amount into your pension, which actually means more money would go into your pension, or, and if you could prefer, you could set it up so the same goes into your pension, and in that case, you'll end up with slightly more take-home pay.

Now, using salary sacrifice means that there would have to be a change to your employment contact, and there are some circumstances where salary sacrifice can't be used, or isn't a good idea. So, for example, you can't use salary sacrifice if it means that your wages will be taken below the minimum wage. Now, for the majority of people, though, salary sacrifice is definitely worth considering. But if your employer offers this, then they'll be able to let you know the circumstances where it's not a good idea. Now, if you receive a bonus through your work, then you can use bonus exchange, if your employer offers that, and that works in the same way.

So, kind of, back to Kate's original question which is, 'Is this something that's offered everywhere?' The answer is no. It's not necessarily something that all employers offer, although a number of them do. But there are tax advantages for employers as well. So, if your employer doesn't offer salary sacrifice, it's definitely worth asking if they consider it.

Clare Moffat: Yes, we've had a question from Ioli and a couple of other people about moving overseas. Now, the question asked was, 'If I leave the country and don't come back, can I get my pension money back?' Well, the whole pension, including any tax relief and employer contribution can usually be moved to something called a qualifying recognised overseas pension. Now, that's a pension in another country which HMRC feels operates in a similar way. Now, you can sometimes leave your pension here and your pension could be paid to an overseas bank account, but you know, in both of these situations, I would say that financial advice is key because you're dealing with different jurisdictions and there are different tax issues in different countries.

Sarah Pennells: Now, Clare, we just talked a bit about how much you can pay into your pension in relation to your salary, but if you're in the fortunate position of earning say, you know, £100,000 a year, £50,000, whatever it is. Could you pay all of that into your pension, assuming that you could afford to?

Clare Moffat: Well, in theory yes, but there might be some tax consequences of doing that. So, so, let's talk about something called the annual allowance. Now, the first thing to say is that the annual allowance will not impact most people in the UK, but it's worth explaining how it works because it is being mentioned in the press a lot just now. Now, the annual allowance is a limit on how much money can go into your pension in any one tax year, without paying a tax charge. It's not the maximum pension contributions that you can make, which, which we spoke about earlier and it's really easy to confuse these two situations.

You could still pay more than the annual allowance if you have those earnings to support it, but you would have to be taxed for the amount over the annual allowance. And the annual allowance is currently £40,000 for most people. So, in that example of someone earning £100,000 for example, they'd be able to pay £40,000 of their salary into their pension, in the current tax year without a tax charge, but there is tax concession, and you'll see on the right of the screen there. There's something called carry forward. Now, you can use this if you ever had any amount in a pension. So, you just need to have had even £20 in a stakeholder pension years ago to be able to use carry forward.

Now, this means if you haven't used your annual allowance from the three years before the current year, then you can carry that forward. But this is only relevant if you can make them large contributions into your pension and you have the earnings to match that mount of pension contribution that you want to make. Now, again, financial advice is key to help with carry forward, it's quite complicated. If you want to find out, you know, more information about how carry forward works, again, there's a really helpful article about it on the MoneyHelper website.

Sarah Pennells: And it's important to say as well, that how pensions saving are measured against the annual allowance depends on the, kind of, pension scheme that you're in. So, for defined contribution pensions, which we've been talking about, where you and if you're employed, your employer build up a pot of money and based on your own contributions, plus of course, that tax relief. Any employer contributions and any contributions made on your behalf by someone else, all count towards that allowance.

Clare Moffat: For defined benefit pensions, it's not quite as easy as that. So, that's-, so it's mainly public sector pensions now and where you're guaranteed that certain amount in retirement, which is linked to the salary you earned when you're employed. Now, in that situation, your annual allowance is based on the increase in your pension benefits over the tax year. So, that can be quite tricky to work out because it's just-, it's not as easy knowing £20,000 went into your pension fund.

Now, your pension scheme can explain more about this, and they'll tell you how much you've used. Again, if you think that the annual allowance affects you, the best thing to do is to take financial advice and it's really important to say, that an annual allowance tax charge it doesn't necessarily mean that you should stop paying into your pension, you can actually end up better off in retirement, even if you have had an annual allowance tax charge. But an adviser will help you work all of this out.

Sarah Pennells: I realise that we're throwing a lot of terminology around, but I have heard of one, something called tapered annual allowance. So, is that the same as the annual allowance?

Clare Moffat: I think the confusing is that lots of these terms sound quite similar. So, the tapered annual allowance is not quite the same as the annual allowance. Now, this affects even fewer people than it did a few years ago and it reduces that annual allowance from that £40,000 mark, gradually, sort of, tapering down until it could reduce to £4,000. Now, it all depends on how much you earn. There's a two part test, but essentially this is only going to affect you if you have income over £200,000 after your pension contributions have been deducted.

Again, getting advice on this, you know, if it is something that you think might impact you is really important. Okay, so, there's one more allowance though that we should mention. And again, it sounds quite similar. We've saved this one until the end because this allowance, now it's called the money purchase annual allowance is unlike the other allowances we've discussed because it's only going to affect you when you take money out of your pension, not when you pay money in. So, Sarah, can you tell us a little bit more about the money purchase annual allowance?

Sarah Pennells: Yes, absolutely. And we aren’t speaking in detail in this webinar are about what happens if you take money out of your pensions because frankly, we just don't have time today, but it is worth talking about the money purchase annual allowance for the reasons Clare mentioned. It's been in the news recently and there have even been some rumours that it may be disappearing in next week's budget, so it's good to mention it. And it is something that can potentially affect a lot of people.

So, the money purchase annual allowance may affect you if you start to take money flexibly out of your defined contribution pension pot and later, want to contribute to a pension and it does this by dramatically reducing the amount of money that you can pay into your pension every year, without having to pay a tax charge. Now, taking money flexibly includes, taking an income, or maybe taking a series of lump sums from your pension, but it doesn't include taking the tax free cash out of your pension, or using your pension to buy a regular income in the form of an annuity.

So, let's talk about this more and explain it with some figures. We've said that the annual allowance is £40,000, but if you trigger the money purchase annual allowance then the amount that can be paid into your pension drops right down to £4,000. So, for example, you know, you might have stopped work and, you know, retired and started to take a bit out of money out of your pension, on top of that tax free cash lump sum. And then realised that actually, either you miss work or the cost of living crisis, for example, means you have to go back to work. And then when you're back in work, you'd only be able to contribute £4,000 a year into your defined contribution pensions.

Now, £4,000, that's about £333 a month, but as I mentioned earlier, that £4,000 limit includes any contributions you make, any contributions your employer makes, if you're in a workplace scheme and the tax relief. And we are seeing more and more people going back into work as a result of the cost of living crisis when they had retired. So, I think having explained when it does apply, Clare, when doesn't the money purchase annual allowance apply?

Clare Moffat: Well, it doesn't apply if you take money out of a defined benefit pension. So, those public sector pensions we mentioned. So, say I was a nurse, so, if I retired at 55 and took my tax free cash and pension income, but then decided a few years later that I wanted to do a totally different job and I went to work in a shop. The money purchase annual allowance doesn't apply to me and that's because it's not flexible access, it's from a defined benefit pension. And in a similar way, it doesn't apply if you take tax free cash and buying an annuity which isn't flexible.

It also doesn't apply if you only take your tax free cash and then move the rest of your pension money into drawdown, but don't take any income from that drawdown. So, that might be because you're still working. So, we would often see people reach the age of 55 and want to access some of their tax free cash and move the rest into drawdown. So, they will not trigger the money purchase annual allowance. So, just to put some numbers around it. If I have a £100,000 in my pension pot, take £25,000 tax free cash and move the rest into drawdown, but don't touch it, probably because I'm still working, my annual allowance will still stay at £40,000. And it also doesn't apply if you take up to three small pensions of less than £10,000.

Sarah Pennells: And what about a bit more detail about when it does apply?

Clare Moffat: Well, it will apply if you've moved that pension pot into drawdown and start to even take £1 of income. So, probably when you've stopped working, that you need some income to live on. It'll also apply if you take any amount of a cash lump sum. Now, cash lump sums are those payments where 25% is taxed at 0 but the other 75% is taxable, both those payments come into your bank account at the same time. So, you'll get the tax free part and the taxable part.

Now, if I even took £100 of one of these cash lump sums, then I trigger the money purchase annual allowance. Before we hand over questions that have come in during the webinar, there's one question that many people submitted, in fact, it was one of the most asked questions. Eleanor was just one person who asked it. Now, that question is, 'I have multiple pensions from different jobs, should I consolidate them?' And again, Sarah, this is another topic that we did a webinar on.

Sarah Pennells: That's right. So, we did a webinar on pensions transfers or pension consolidation last summer and there's the link to that on this page. I think though, having said that, it is worth spending a bit of time just talking about some of the pros and cons of transferring. Before we do that though, I think it's also worth saying, when you can't transfer a pension. So, you can't transfer a pension if you're in a public sector scheme, such as the NHS, teachers, police or fire fighters and that's because the money that you pay into your pension today, goes out to pay today's pensioners. So, there's no actual fund for you to transfer out of.

The only exception in terms of public sector pensions is the local government pension scheme, which does have a fund. So, in theory, you could transfer it, but it is generally assumed to be bad idea to transfer from one of these public sector final, defined benefit pensions. So, Clare, if you are somebody and many of the people who submitted questions who you said did, who has say, several defined contributions pensions and you're thinking of transferring or consolidating, what are the main pros and cons?

Clare Moffat: Well, there are several things that you need to think about. It's worth emphasising that we're not financial advisers, so we can't advice you on the best course of action. But in terms of pros and cons, there are a few to consider. So, the first thing is charges. Now, it might be worth consolidating your pension to one that has lower charges, but the cheapest isn't always the best. Now, you might be actually paying a little bit extra, for, extra for features that are really important to you. Secondly, fund choice. Now, we talked earlier about where your pension money is invested and the fact that you don't have to keep it in default fund, for example. Now, most pension schemes have a number of different investment funds that you choose from, but some might have a wider range and others might have a focus on certain things. So, for example, responsible investment and again, that could be really important to you.

Now, if you've a few smaller pension pots of under £10,000, so, maximum of three. You might not want to transfer them because you could take them out without triggering the money purchase annual allowance that we, you know, I just spoke about. So, it might be useful, even if you've got, you know, a kind of, a bigger pot to leave a few of these little pots because it wouldn't trigger that allowance. The last reason why you might want to combine your pensions is if one or more of your pensions has quite restricted options in terms of what you can do with your money when you retire. So, you might have to take all of your money in one go for example, or you might not be able to go into what's called drawdown and that could be because it's an older style, type of, pension.

Sarah Pennells: Now, it is important to say of course, that there's no guarantee that by, by combining your pensions, they'll do any better than if you left them where they were. And in some cases, it can be a bad idea to transfer your pensions, especially if they're older ones because they can have a valuable features, such as a guaranteed annuity rate or a guaranteed value. Now, if you do want to find out more about transferring your pensions, I would really recommend that you watch our webinar and if you're thinking of combining your pensions, it's a good idea to talk to a financial adviser.

So, we've covered a lot in the last, well, 40, nearly 45 minutes or so, but we do have some time for some questions, but before we do that there's one last poll because we'd really like to know, what topics, what topic you'd like us to cover in future webinars. So, please vote now in the last poll of our webinar.

Clare Moffat: It's interesting, the numbers are going up and down.

Sarah Pennells: So, at the moment, pension options at retirement is winning by a nose, I'd say.

Clare Moffat: Yes, and we didn't have the time today to talk about what happens at retirement. It's a massive subject as well and again, you know, in the questions before the session today we did have quite a few questions on that as well because it does seem quite a confusing time and people aren't sure about the different options that are available.

Sarah Pennells: Yes. So, okay, well, I think, you know, I think we've got a very clear, a clear answer there. So, that's good to know. Also, the one on financial advisers, how to find a financial adviser and what they do. So, thanks very much for voting because that's really definitely given us some very clear answers about what you want to know about next. So, as I said, we have got time for some questions, and we've had a lot of questions coming in. So, again, thank you so much for submitting questions.

The most popular one which is from Alex, I, I think it's something we've just been talking about which is transferring pensions. So, hopefully Alex, you feel that we've answered your question. Alex says, 'I've got a couple of different pensions from different jobs, plus my current one with Royal London, is it advisable to bring these into one fund.' So, we have just covered it and as I mentioned there is the link to the transfers webinar. So, I hope you don't think that we're ignoring your question but it's a really important topic, but I think the best thing probably, unless there's anything you want to add Clare. The best thing is possibly to listen to our webinar.

Clare Moffat: Yes. I think there was a lot more detail in that webinar, but it is something and because people are changing jobs much more frequently than they did in the past, then people will have more pension pots and, you know, it, it's obvious-, you know, everybody, kind of, thinks, 'Will, will it make it easier administratively if I can everything in the same fund?' But for some of the reasons we mentioned, there are, you know-, sometimes it might be a good idea but there could also be scenarios when not a good idea to do that. But, yeah, much more detail in the webinar on that.

Sarah Pennells: And I think it does depend a bit on the kind of person that you are, in that some people find it quite easy to keep track of a lot of pensions. That might seem like an odd thing to say but especially these days when many pension companies have apps, you know, you can login online. It-, not that you necessarily have to go through pieces of paperwork to find out what's happened to your pension. Other people do find it quite overwhelming. So I think it's about, you know, there, there may be reasons around, you know, charges and things like that, and the levels of risk and, and, and the features you mentioned, but it also does come down a little bit to the kind of person that you are. But, as we've pointed out, there are some pros and cons and it is definitely worth thinking about what you might be giving up as well as, you know, the level of charges you could pay by transferring and so on. So, okay, we've had quite a few more questions. Now, Lily has submitted a question saying, 'I'm a bit concerned that the value of my pension has dropped. What can I do about this?' And we did have one question about this that we covered earlier on in the webinar but, Clare, I think it's just worth spending a bit more time talking about this, because, you know, nobody likes to see the value of their investments, whether it's a pension or, you know, stocks and shares, an ISA, whatever it is-, you don't want to see that value go down.

But I'm not trying to be flippant when I say that, but stocks and shares, investments, I mean, they're, they're not a steady line. They do go up and down. You do get volatility. That does go along with investing in stocks and shares. But is there anything people can or should do, apart from, you know, understand that emotional side, which is it is hard to see the value of your money going down?

Clare Moffat: I think when there’s times of, you know, things are happening that maybe are causing fluctuations in the stock market. If people are looking at an app every day, then that's not giving them a, kind of, consolidated view over, over time. So sometimes that can make people feel a little bit more anxious. It's also very important, and you mentioned this earlier, you know, risk and, and what level of risk you're comfortable with is important, and that's when it can be really good to have a financial adviser who can talk through these things. Also it's worth remembering that pensions are a long-term investment and they do invest-, pension funds invest in a huge amount of different assets so they'll have different-, it, you know, it won't just all be equities, whether it can be a bit more of a, kind of, volatility. There might be commercial property, for example. There might be other, like, government bonds and things like that. So, there is-, you know, they're meant to, kind of-, that, that should deal with some of the risk. But obviously if you're in your twenties, for example, then you've got a long time until you can take out your pension, so perhaps, you know, worrying about what's going to happen then isn't as important as if you're getting closer to retirement. You might be thinking about, 'Well, maybe I should be in some more cautious type of investments.'

But, you know, I, I can't, kind of, say enough that actually having a financial adviser whose job it is to take that kind of worry away from you by helping you work out what level of risk you're comfortable for is, is really worth its weight in gold.

Sarah Pennells: Yeah, really good points, and I think it's also just worth saying that, depending on the age that somebody is, they may want to have a, a, an appointment with Pension Wise. Now, Pension Wise can't give anybody financial advice but it can talk you through the options. It's designed for people who have to find contribution pensions once they're over the age of 50 to think about the different options. But, again, it might just be useful to, kind of, just, just to have a conversation so you can find out. Pension Wise is-, it's a government website and you can book a-, you can have an online appointment or you can book a phone call, so that's maybe something to think about as well. Now, we are getting quite a few questions about what happens to your money when you take it-, what happens to your pension when you take money out of it, which we, sort of, said we weren't going to cover but I don't want to ignore the questions that are getting voted up. So, there's one here from Phil, which is-, Phil Jones, who says, 'What is the impact of withdrawing from my pension at the age of 55 if I plan on carrying on working? Would it affect other pensions or are they considered totally separate?' So, Clare, what's, what's the answer to that?

Clare Moffat: Okay, so let's, kind of, take the first part of this. So if Phil wanted to take, say, his tax-free cash, because he's still working, so he takes his tax-free cash and that money comes into his bank account and he moves the rest into drawdown, so the other 75% goes into drawdown. Now, drawdown is just like a, a, a pension pot. It's invested. It can be invested in similar assets, but that-, if he doesn't take any of, of that money, then he'll not have any additional income tax to pay. He'll not trigger that money purchase annual allowance we spoke about. So, looking at it that way, just taking the tax-free cash, if that's what he needed, then that's probably the-, a better thing to do. If he decided he needed all of a fund, so say he had three different pensions but one of them was worth £50,000, for example, if he wanted to take all of that pension then, then 25% of that £50,000 would be tax-free, but he would pay tax on the other 75%. And, you know, so there's an income tax issue because he'd be paying more tax than he normally would be paying, but he would also trigger that money purchase annual allowance, which would mean he'd be restricted to paying a maximum of £4,000 into his other pensions. I think when Phil's saying would it affect other pensions or are they considered separate, so they, they are separate. They're separate pensions. For each of those pensions, you get 25% tax-free cash and you can do different things with them.

So, you could move, you know-, take tax-free cash from one pension and move the other 75% drawdown but you-, you know, with another pension, you could take 25% tax-free cash and then buy an annuity with the part that's, that's left as well. So, you can do different things with them but from each of those pensions, you are allowed 25% tax-free cash. But if you go over that 25% tax-free cash and you access any of the rest flexibly, or you take one of those cash lump sums, so instead of taking that 25% tax-free cash, you take a cash lump sum and that comes with-, you know, I mentioned the fact that that comes, kind of, together, so you get the tax-free part together with the taxable part. There's an income tax issue but also, even for that £100, if he takes it, then he would trigger that money purchasing allowance.

Sarah Pennells: Great stuff, thank you. Now, we've had another question. We have one from Kerry about is it better to keep pensions separate or transfer them but I think we'll-, I, I think we've done quite a lot on pension transfers, just in this-, in this webinar and I said we did the whole webinar in June, I think it was, last year. So, I hope you find that useful. Jane's asked a question saying, 'If you've had a number of providers over the years, is there an easy way to find out where you hold differing pots of pension funds?' And, and, Clare, I mean, if I mention the two words pension dashboard, I think this is something we've talked about in a couple of webinars, about how this is going to be, kind of, coming down the tracks and this is gonna be-, you'll be able to see all your pensions in one place, including your State Pension. But there was news about that just last week, wasn't there?

Clare Moffat: Yes, so the pension dashboard is being put back a little, just so there can be more testing and, and things like that done. And it will make things much easier, but just now, what Jane could do is get in touch with the providers. If you can find the paperwork, get in touch with the providers. They'll be able to tell you how much is in the different funds. What happens if people move house sometimes, they don't remember to let different-, especially if it's a job, a few jobs ago, then you might not remember to get in touch with the pension scheme. So, sometimes people aren't getting the documentation to the right address. But if you think you, you know, you might have been in a pension and you can't remember much about it, then I think the Pension Tracing Service is a good service to use. Sarah, if you want to say anything more about that?

Sarah Pennells: Yeah, so, as, as you say about the pension dashboard, I think it was due to come in in 2024, I believe, but there has been, as you say, a, sort of, a slight delay on that. The Pension Tracing Service, now, it's really worth saying that this is-, this is a government service and it's called Pension Tracing Service but it doesn't actually trace the pension for you and, kind of, bring it to you. What it does do, though, which is very useful, it will give you the latest and, sort of, up to date contact details for an old pension that you have. So, what you need to do is either have your current name of your employer, an old name of the employer if you don't have that, or if you know the pension scheme name, then pop that information in. And that's a, a government website and we can send out the details of that with the e-mail after the webinar or with the link to this webinar. And what the Pension Tracing Service does is it'll give you the up to date contact details. You then need to contact them. They'll normally ask you for your National Insurance number and some other questions, and then they'll tell you whether indeed you have got a pension with them and then you can find out how much it's worth. Now, when you're looking for the Pension Tracing Service, please make sure that you look at the, the gov.uk website because there are some other companies around that sometimes advertise and, you know, come to the top of a Google search or search engine search and they may charge you.

Whereas the government's Pension Tracing Service is free to use. Now, we've had a lot of questions. As I said, a lot of them actually are about pensions and retirement, so I think that's definitely gonna be something we do a webinar on. But there was another question that I just saw a moment ago and I was thinking, 'This would be a really good-, yeah, it's a question from Dave, who says, 'Is the income from the State Pension taken into account when income tax is calculated from private pensions?'

Clare Moffat: So, yes, yes and no. It sits in your income tax stack, which means that then if you have other pensions, then they will-, so it will use up-, that State Pension will use up some of your personal allowance, so we've got £12,570 of our personal allowance. State Pension will, as we talked about earlier, so it's going to over £10,000, it will use up most of your personal allowance. So, so if you only had State Pension, then you wouldn't pay any tax on it, but if you have private pensions sitting on top of that, then you will use up the last bit of your personal allowance and then you'll pay 20% tax, 40% tax and, and so on. So it's a, kind of, yes and no question. So it might be that you-, say you retired at 60, then your State Pension wouldn't have kicked in. So, you would receive more of your private pension money without paying tax on it, but then when your State Pension does kick in, it essentially comes first. And then pensions are taxed like salary is taxed. It works in exactly the same way. So, you know, it just has, kind of, bands and thresholds, so once you're over the personal allowance, as I said, you're paying 20% tax.

Sarah Pennells: Okay. I'm gonna try and sneak in two questions in the last few minutes, so they're, they're hopefully short-ish answers. So, Simon has asked, 'What is a drawdown?'

Clare Moffat: Okay, so drawdown, if, if you think of a pension pot for the money you save up, so the money that you pay into, your employer might pay into and where the tax relief goes, if you think of that as one pot and it's invested-, as I said, it can be invested in lots of different things. Well, a drawdown pot is just another type of, of pot. It's just-, it's invested in the same way. It could be invested in exactly the same type of assets. The only difference is that one has-, you know, you have to go through a, kind of, pensions tax process to get from one to the other, and you would have an entitlement to tax-free cash. So once you take your tax-free cash and then move the rest into drawdown, you can do that. You don't have to do that all at once, so you could take-, you might have a, a pension pot of £100,000. You might take £10,000 and you could take £2,500 as tax-free cash and move the other £7,500 into drawdown. Then that money is just sitting available for you to take out when you want to take it out. So, you've got to be over 55 and you can't pay money into a drawdown plan. So if you can still make pension contributions, then the money would go into that, kind of, pension pot but the drawdown fund-, kind of, you don't ever need to take any money from that. Some people leave some pensions and pass them on on death.

But when you take-, you can take money out of it, but you can't pay into that separate pot. So if you think of them as, kind of, two different pots but, sort of, invested in the same things.

Sarah Pennells: Okay. Right, now one last question, which hopefully is going to be quite a quick answer. It's a question from Murray who wants to know, 'Tax relief is not provided on employer contributions. Correct?'

Clare Moffat: Well, yes and no. If you are-,

Sarah Pennells: Your favourite answer.

Clare Moffat: I know. If you're a business owner, then an employer contribution, you'll get corporation tax relief on. So if you're a, a director of a business, so there is corporation tax relief on that. And, but I don't know if this question is in relation to, kind of, when we spoke about salary exchange. Because what happens there is that you, your employer is making the full contribution on your behalf and, in exchange, you're getting less salary normally. So, so you're not getting income tax relief on that but you aren't-, well, it's not in the same way as we mentioned. So what happens is your, your employer is going to pay more on your behalf and your salary goes down, so because your salary has gone down, you pay less income tax and less National Insurance. So that might be what he's, kind of, getting at but, yeah, so employer contributions do get tax relief, it's just not income tax relief.

Sarah Pennells: Okay, well, great stuff. We have had so many other questions but we are going to probably carry some of these over into future webinars because, as I said, we've had a lot of questions about pensions and retirement. But thanks again. A huge thank you to everybody who submitted questions in advance and during the webinar, and for voting in our polls, all of which is appreciated. So, we will be sending out a, a link to the recording of the webinar in the next day or so. In the meantime, thanks again very much for joining us and have a very good afternoon.

Clare Moffat: Thank you.


Catch up on our pensions experts Sarah Pennells and Clare Moffat talking about how the State Pension works and how to find out what you're entitled to. They also answer some frequently asked questions about the State Pension. This session was recorded on 6 December 2022.

Sarah Pennells: Hello, I'm Sarah Pennells and I'm the Consumer Finance Specialist here at Royal London.

Clare Moffat: And I'm Clare Moffat and I'm Royal London's Pensions and Legal expert, and we're going to spend the next 45 minutes or so talking about the State Pension. Sarah, it's a big topic and there's so much we could talk about.

Sarah Pennells: It really is and when we publicised this webinar, we included a link where you could submit a question in advance and we received over 90 questions, which is absolutely fantastic. So, we've used these questions, we've gone through them, and we've used some of the most popular questions to help us, sort of, frame this webinar and we'll be answering them throughout the webinar, but if you'd like to ask a question as we go through though, then we'd love to hear from you, but as with all our webinars, we can't answer questions about specific Royal London products, or about your specific circumstances, but do leave a comment or a question in the Slido link, and before we go any further though and before we get into the webinar, I'd just like to remind you that we are recording this webinar and we will send you a link in the future. So, everybody who's registered will get a link so they can rewatch or indeed watch the webinar. So, let's get on with the webinar then, Clare.

Clare Moffat: Okay. So, let's start with the basics. What is the State Pension and how much do you get?

Sarah Pennells: Well, the State Pension is a payment that you get from the government once you reach State Pension age, and I think before we talk about how much you'll get, we got so many questions about the State Pension age, I think it's worth spending a moment or two talking about when you get the State Pension, but before that, I think it would be a good time for our first poll. So, the question is, 'Do you know your State Pension age?' So, please vote in our poll.

Clare Moffat: Okay, it's interesting watching the numbers going up and down.

Sarah Pennells: Yes, I mean, it's, it's positive at the moment that so many people do know their State Pension age because, you know, with the State Pension age having changed, it wouldn't be surprising if a lot of people were quite confused, but it's-, we'll leave it for a second or two more, because the votes are still coming in, but definitely, the majority of people say they do know. About 8%, so, sort of, one in twelve, saying they're hoping to find out today, which is also great. Okay, I think it's probably settled down now, so 77% are saying they know their State Pension age, 15% say they don't, and 8% say, 'Hoping to fund out today.' So, let's hope that we can give you some information about that, but we did have a lot of questions on this, including one from Anita who asked what the State Pension is at the moment, and it's a really good question because, as I just mentioned, the State Pension age has been rising. So, it used to be 60 for women and 65 for men, but now, it's 66 for both men and women, and that simply means that you have to be 66 years of age before you can claim the State Pension, but because the State Pension age has changed both for men and women, you know, you may know people who are older and who've been getting their State Pension since they were 65 if they're men or even as early as 60 if they're women, and because the State Pension age is rising, in the future, some people may have to wait until they're 67, 68, or possibly even older before they can claim their State Pension. So, anyone born after April 5th 1960 will be affected by the rise in State Pension age from 66 to 67, and under the current timetable, anyone who's birthday falls between April 6th 1961 and April 5th 1977 will have a State Pension age of 67.

Now, we got another question which was from Vanessa and she wanted to know, 'What's the cut-off date for the rise in the State Pension age between 67 and 68?' Now, currently the law says that the State Pension age will rise from 67 to 68 between 2044 and 2046, so that effects those people born after April 5th 1977, which I just mentioned a moment ago. However, there was a review by the government a few years ago that recommended that this timetable was brought forward by almost ten years. It suggested that the State Pension age should rise from 67 to 68 between 2037 and 2039. Now, that new earlier timetable isn't currently the law, but it could be in the future, or there could be a different timetable, because 1st December, the current government launched a review into the State Pension age, and that is due to publish it's results by next May, at the latest. Now, we had a few questions about the State Pension age, so I hope that's answered most of them.

Clare Moffat: And you don't get the State Pension automatically either, do you? You've got to claim it.

Sarah Pennells: Yes, that's absolutely right, but I think that, sort of, confuses some people or they're not aware of it. So, when you're a few months away from your State Pension age, you will be contacted by the Department for Work and Pensions, and it will tell you how to claim the State Pension. It should get in touch with you no later than two months before you reach State Pension age, but Clare, what happens if you don't reply to this letter?

Clare Moffat: Well, if you don't do anything, then you won't get your State Pension, it, it's as simple as that. If you don't want your State Pension, once you reach State Pension age, then you don't have to take it. So, instead you can delay or put off claiming it. Now, that's sometimes referred to as deferring your State Pension. Now, you'll get a bit extra by delaying claiming your State Pension, but if you want it as soon as you're entitled to it, you do need to claim your State Pension.

Sarah Pennells: So, if you are currently 65, you know, you've sent back your letter to claim your State Pension, do you get your first payment on your 66th birthday, kind of, like, 'Happy Birthday from the DWP'?

Clare Moffat: Not quite. So, the State Pension is usually paid every four weeks and it's paid in-arrears. So, that first payment you'll get will be for the previous four weeks, and we had a question from Alison who asked whether she can take her State Pension when she's entitled to claim it and still carry on working. So, Sarah, what's the answer?

Sarah Pennells: Well, the short answer is yes. Your State Pension age and the age that you retire at are completely separate. So, you don't have to retire when you take your State Pension and you don't have to take your State Pension when you retire.

Clare Moffat: Yes, we'll talk more about delaying your State Pension a bit later on as well.

Sarah Pennells: Well, we talked about what the State Pension is and when you might get it, and the fact you need to claim it, but we haven't discussed how much it is, and in order to explain that, we need to talk about the two different types of State Pension. So, anyone who's reached State Pension age on or after April 6th 2016 will receive what's called the new State Pension, and to get the full amount, you need to have paid or been credited with 35 years of National Insurance. If you reach State Pension age before then, you'll come under the basic State Pension system, and in that case, to get a full State Pension, you need 30 years of National Insurance, but under the basic State Pension system, you may also get an additional State Pension, a second State Pension that, kind of, sits on top. So, Clare, talks us through the figures. How much might someone get either under the new or the older basic State Pension system?

Clare Moffat: Okay, so let's look at this chronologically. So, for people who retired under the old basic State Pension system, if they're entitled to the full amount, they'll get £141.85 a week, and if you're married, in a civil partnership, or living together, you'll each get that amount, as long as you've paid enough National Insurance. Now, for people who built up an additional State Pension, under the basic State Pension system, they could also get a significant amount more each week. Now, how much you get will depend on how many years you paid National Insurance for and how much you earned among other things. When you claimed your basic State Pension, you'd automatically receive this additional pension as well. Now, for people who come under the new State Pension system, they'll get £185.15 a week, again, if they're entitled to the full amount.

Sarah Pennells: So, what does that work out at on an annual basis?

Clare Moffat: Well, I mentioned that the full basic State Pension is £141.85 a week. So, you'd think that the annual State Pension would be 52 times this, but that's not quite right. To find out the basic State Pension as an annual amount, you divide the weekly figure by seven and then multiply it by 365.25. Now, that extra .25 is to account for the leap year, and when you do that, it gives you the annual basic State Pension amount of £7,367.61. Now, for the new State Pension, where the weekly amount is £185.15, the annual amount is £9,660.86. Now, as we heard in the Autumn Statement, both of those payments will go up by September's inflation rate, so that was 10.1%, from next April. So, that will mean that once that increase kicks in next April, someone getting the full basic State Pension will get £156.20 a week or £8,150.29 a year. Someone receiving the full new State Pension, well, they'll receive £203.85 a week or £10,636.60 a year, and Sarah, we've had a question from Cheryl. Now, she wants to know whether she'll be able to survive on the State Pension. Now, obviously, it'll depend on Cheryl's circumstances, but you had a glimpse on what it was like to live on the State Pension, didn't you?

Sarah Pennells: Yes, that's right. So, in the summer, I was joined by five of our customers and we tried to live on the equivalent of the State Pension amount for a week, and I have to say that it was quite a challenge, and we did it in summer, and so, that was without winter bills, and I think we all found it quite tough, accounting for, you know, trying to live on that budget, but I think the real thing that I took away from it was that, although it was, sort of, doable for a week, although it wasn't the kind of life that necessarily you'd want to have in retirement but it was, you know, doable, there was absolutely no slack in the system. So, you know, things like your boiler breaking down or if you've got a car, you know, car needing repair, it was really hard to get the money for those kind of bills. If you want to find out how I got on and the customers who joined me, then we've got videos on our State Pension hub. You can just see our daily videos, how we got on. We'll give you the address of the State Pension hub in a moment. Now, we had a question from John that was submitted in advance and he wanted to know why there are two different rates of State Pension. He says, you know, 'All pensioners use facilities like shops, they don't charge people who are on the basic State Pension less.' So, Clare, what's the answer to that?

Clare Moffat: Well, we could devote a whole webinar to this, but the short answer is that people who retired under the old State Pension, after April 2010 but before 2016, only had to have 30 years of National Insurance to get the full amount, whereas the new State Pension, well, it needs 35 years, and under the basic State Pension system, some people did very well. So, if they had the chance to build up an additional State Pension, but many women didn't get the full basic State Pension, never mind anything on top. So, part of the overall thinking behind changing the State Pension system was that it would be fairer overall, but Sarah, I hear from people who get very different amounts to these, so why is that?

Sarah Pennells: Well, there could be several reasons. So, if somebody's getting less than the full basic or new State Pension, then that could be because they haven't paid or been credited with enough National Insurance. If someone's getting more, then it could be because they reached State Pension age before April 2016 and were entitled to an additional pension on top of their basic amount, or it could be to do with what's called your starting amount. So, when we moved from one State Pension system to another, so from the basic State Pension to the new State Pension, there were protections put in place, to make sure that people who'd built up a bigger pension than the full new State Pension amount weren't worse off as a result of this changeover. Now, those rules meant that on April 5th 2016, there was effectively a snapshot of your State Pension entitlement at that date, and that snapshot looked at how much you would've built up under the old basic State Pension system, how much you would've built up under the new, new State Pension system, and it took the higher of the two amounts. Now, whichever was the higher of the two amounts became your starting amount. Now, then, any State Pension that you built up after April 2016 was under the new system.

So, if your starting amount was higher than the new state, State Pension amount in 2016, which then was about £155 a week, you would keep that, and then, you'd build up more State Pension, either through paying National Insurance, if you're employed, or self-employed, or getting credited with National Insurance, perhaps because you're out of work and claiming benefits, for example, or if you're getting child benefit instead, and you could increase that amount further by delaying taking your State Pension, and we'll discuss that in a moment, but Clare, I think it's worth just spending a few minutes talking about how you get National Insurance contributions for your State Pension. What do the rules actually say?

Clare Moffat: So, let's talk about National Insurance contributions while you're working, first of all. So, we pay National Insurance contributions until we reach State Pension age to qualify for certain benefits and State Pension and-, is one of those. Now, we start paying National Insurance if we earn around £12,500, but if you earn between, between just under £6,400 and £12,500, the-, then even though you don't actually pay National Insurance, you are treated as having paid National Insurance, to protect your National Insurance record. So, that's called a qualifying year, but if you don't earn as much as the £6,400 amount, then that won't count towards your National Insurance, so there will be a gap. You also qualify if you're self-employed and pay something called Class 2 National Insurance contributions.

Sarah Pennells: And if you're not working, you may be entitled to something called National Insurance credits?

Clare Moffat: That's right, Sarah. So, you can get National Insurance credits even if you aren't working. Now, sometimes, these credits happen automatically, so, for example, if you're on Universal Credit, Job Seeker's Allowance, or Employment Support Allowance. You might have to claim it, in certain scenarios though. So, for example, if you're on Statutory Sick Pay and you're not going to earn enough to have a qualifying year. So, that-, around that £6,400 amount I mentioned. Now, you will get National Insurance credits automatically if you're a parent or a guardian who is registered for child benefit for a child under twelve, even if you don't receive child benefit. Now, that sounds a bit odd. That's all to do with something called the Child Benefit Tax Charge. It was introduced about ten years ago. So, in households where one person has income over £50,000 and children live in that household and child benefit is claimed, the person who has that income of over £50,000 will receive a tax charge. Now, once they've got income over £60,000, that tax charge is the same as the amount of child benefit that would have been received. So, so, many people decide not to register for child benefit, because they'll have that tax charge, but if one spouse is going to be a stay-at-home parent, it's essential that it's that person who registers for child benefit for each child born and they tick the box that says they don't want to receive the child benefit payments. So, they're notifying of those credits happening, but they're not actually receiving any money monthly for child benefit. Now, that triggers those National Insurance credits, and it also triggers a National Insurance number being sent out to the child when they're approaching sixteen.

Sarah Pennells: So, it's really important that the right parent, as it were, applies for child benefit, but what happens if the other parent has applied?

Clare Moffat: Yes, so we're finding a lot of people who don't know about this, and the parent who's working filled in the form and said they didn't want child benefit, but you can transfer credits from one parent to another using an online process. It's also worth stating that it's possible for a grandparent or certain other family members to claim National Insurance credits when they're looking after grandchildren. So, maybe they stopped working to help out with childcare, but they don't have their 35 years of contributions. Now, the parents have to agree to this, but these credits can be back-dated to 2011, and they also cover non face-to-face contact during the lockdown period. So, if the grandparents amused the children via Zoom, for example, that would count. Now, if you want to know more about that, then the gov.uk website has lots of information on National Insurance credits.

Sarah Pennells: So, we talked about how much you get and the State Pension age, but it's a good idea to find out when you'll be able to claim the State Pension and how much you might personally get. So, time for our second poll, Clare. What's the question this time?

Clare Moffat: So, the poll question is, 'Do you have a copy of your State Pension forecast?'

Sarah Pennells: Wow, okay, so this is interesting. Most people, at the moment, I mean, we're still getting a lot of the votes coming in, so I'll it just-, let it settle, but about six in ten are saying they don't have a copy of their State Pension forecast and about 35-36% are saying, yes, they do. So, we'll, we'll let this run, just for a moment longer, but I think that's really interesting, because people were very confident about what their State Pension age is, which is great, I mean, that's a really good first step, isn't it? But not so much about actually what they might get when they reach State Pension age. So, I think it's settling down, so six out of ten say no, and just under three out of ten say that they, they have got their State Pension forecast. So, if you'd like to find out when you're going to get your State Pension and what you'll get, you can do this on the gov.uk website. So, if you go to gov.uk/state-pension-age and put in your date of birth, it will tell you the date that you'll be able to claim your State Pension and how old you'll be, but it won't tell you how much you'll get. So, in order to find that out, you need to go back onto gov.uk this time /check-state-pension, it's on-, the information is on the slide. Now, if you've got a government gateway account, then you can fill in an online form that tells you how much State Pension you're going to get when you reach State Pension age. If you don't have a government gateway account, you'll need to set one up. Now, it's actually fairly straightforward to do, but there are a few steps involved and you will, for example, need an email address so you can get a confirmation code. Now, we've written a four-step guide on how to get your-,

Clare Moffat: So, I think we've lost Sarah there, briefly. So, we've written-, as Sarah said, we've written this four-step guide on how to get your State Pension forecast online, and that's on our State Pension hub, and there's lots of information there on what you need to do to create that government gateway account. Now, there are two other ways of getting your forecast. So, applying online is the quickest way, but if you can't look at the internet, then you can fill in the form BR19 and send that off by post, or you can phone up the Future Pensions Centre and ask them to send it out to you, but you have to be reaching State Pension age in more than 30 days to do that, so don't wait until it's too late. So, I think it's worth talking through the information that you'll get on your State Pension forecast. Now, first of all, your State Pension forecast will tell you when you reach State Pension age and how much you're on track to get as weekly, monthly, and annual amounts. So, you can see that on screen, but these amounts are not guaranteed. It's made very clear in a disclaimer that the State Pension forecast isn't a guarantee and is based on current law, and it doesn't include any increase due to inflation. Now, I think it's probably worth checking your forecast a, a few times, especially if you've been contracted out at any point, and I'm going to explain what that means in a minute. Now, the next figure on your State Pension forecast, well, it's an amount that you're entitled to based on your National Insurance record.

Now, that's so far, and below that, an amount that you would get if you continue to pay National Insurance, or to be credited with it, until you reach State Pension age. Now, your forecast will-, it's also going to tell you, you that if you're working until to reach State Pension age, you still have to carry on paying National Insurance. So, what-, why is that? Well, I think this puzzles a lot of people. Now, the reason for this is that National Insurance that we make are used in part to fund the NHS and also to pay state benefits, including the State Pension. So, so, if you've already got a full National Insurance record of 35 years and you're due to get your full State Pension of £185.15 a week, you can't just decide not to pay National Insurance, unless you're not working or you don't earn enough to pay National Insurance in the first place. However, while the rules say that you have to continue to pay National Insurance until you reach State Pension, pension age if you're working, you don't have to pay National Insurance once you reach State Pension age. So, say you decide to carry on working beyond your State Pension age, well, there's no National Insurance to pay. Now, there is an exception to that, and that's if you're self-employed and paying Class 4 National Insurance. So, you'd pay that if you have profits over around £12,000. Now, if that's the case, you'll actually carry on paying Class 4 National Insurance until the end of the tax year that you reach State Pension in. Now, there's one figure on the State Pension forecast that we're really keen to explain and that's the COPE figure, or Contracted Out Pension Equivalent. Now, what's that?

Well, if you worked for an employer and you joined their pension scheme, this is particularly common with public sector final salary pensions, but it used to be the case with some private sector pensions too, then you may have been contracted out. Now, don't worry about the jargon here. Contracting out, well, it just means that you and your employer paid less National Insurance contributions, but there was a promise that the occupational pension you were in, well, it had to pay a certain level of benefits, or if it was a defined contribution pension, where you build up a fund, then the savings were held separately. Now, similarly, if you were self-employed, you also paid less National Insurance. Now, in these scenarios, you would be entitled to the basic State Pension, but not additional State Pension. So, what does that all mean? Well, your State Pension might be lower, but you'll have additional benefits in your private pension, and this is where it can get very confusing for people, because you could have paid 35 years of National Insurance but not be entitled to the full new State Pension amount because you were contracted out. So, in that case, part of your pension, now that's that COPE, COPE, Contracted out Pension Equivalent, that's going to be paid by your occupational pension scheme when you retire. So, you're not going to get that from the Department for Work and Pensions in the same way that you receive the rest of your State Pension, and I, I think it's confusing, the way this information is set out on your State Pension forecast and, and some of the people I've spoken to, well, understandably, they think they've to take the COPE figure off whatever their State Pension forecast is telling them they'll receive, but that's not the case.

That COPE figure amount, well, it's just for information only. So, you don't need to subtract it from the State Pension amount. Now, we had a lot of questions about being contracted out, both from people who want to know what it means and how it works and from people who want to know if there's anything they can do to improve their pension, and for those who are further away from retirement, then they might have enough years before they get to State Pension age to mean that they could get so it could get the full State Pension and their COPE amount too.

But what about if retirement's a little bit closer? Well, you might be able to increase the amount of State Pension you get and receive the COPE figure. So, how does that work? Well, that brings us quite neatly onto voluntary National Insurance contributions, and again we had a lot of questions about this. So what are they and, and what might you, you pay them or when might you pay them? Well, you might be able to make voluntary National Insurance contributions for years where you haven't already paid National Insurance, or where you've paid it but maybe you don't have a full qualifying year. So your State Pension forecast will tell you whether you're on track to get that full State Pension amount, but it's not going to tell you the years where you have gaps in your National Insurance record. So in order to find that out you need to check your National Insurance record. Now, you can do this online, on the Gov.uk website if you've got that Government Gateway account that Sarah mentioned, or you can telephone the National Insurance enquiry line. Now, it's something that's really worth doing, and I know that Sarah checked her National Insurance record for the first time about fifteen years ago and she found some gaps in her National Insurance record and she wasn't even aware of them. So if she'd known earlier then she would have been able to fill those gaps, but she's going to be working long enough to pay the National Insurance anyway but of course not everyone is going to be in that position.

Now, I think this will answer the question that we had from Nigel, which is if you only work for part of a tax year and therefore you only pay National Insurance for part of a year, does that count as a full year for your State Pension and does it depend on how much you earn? So, it does depend on what you earn. So say you work for half of a year and not for the other half of a year. Now, if in that six months that you work you have more than 52 times £123, now that £123 is a weekly minimum amount and that, that will make that an annual figure that that's, that's that £6,400 I mentioned earlier, well then you don't pay contributions but you are treated as having paid them. And it doesn't matter about the other six months when you didn't work. You don't need to pay for voluntary National Insurance contributions or to be officially unemployed. But say you only had £5,000 of earning in that six months then that wouldn't be enough. So if you find that there are gaps in your National Insurance record you might be able to make voluntary National Insurance payments, and again we had lots of questions on this so we're going to try and answer a couple now. Now, one of the questions asked by Tony, was that if buying voluntary National Insurance, well, is it good value? When is the best time to buy? So, what's the answer to Tony's question? Well, it's worth finding out how much it would be to buy additional years, now these are often very good value. So you pay a lump sum to buy back one extra year and then you get one 35th of the full pension, so around £300 a year from April.

So if you're quoted £824 for a year for example, so that's the rate of class three voluntary contributions for the current tax year, then you only need to survive for three years once you receive your State Pension for this to be worthwhile, although it does depend on your tax situation. Now, the cost of those voluntary National Insurance, it does depend on the class you're buying, whether it's class two or class three, and the tax year you're buying the voluntary National Insurance for. So, if you're going back six years for example it's going to cost less because you're plugging a gap. Sorry, less because-, than it would to plug a gap in the current tax year. Now, it's worth saying that paying a voluntary National Insurance well it doesn't always leave you better off, so it is worth speaking to someone about that. So for example if you don't have any other pensions from a workplace or a private pension, for example, if you pay voluntary National Insurance, well, you might get the full State Pension amount but you could disqualify yourself from being eligible for a benefit called pension credit. Now, if you're still some years from retiring then paying for voluntary National Insurance, well, it can be a waste of money if you're going to carry on and paying National Insurance too. Now, you can find out whether or not you'll benefit by ringing the Future Pension Centre, and if you want to know whether you'll benefit from voluntary National Insurance and you haven't yet reached State Pension age. If you have reached State Pension age then you need to ring the pension service. So both those numbers are on screen now.

So there's two other points that I think are worth making, and that's that you can normally only go back six years to plug any gaps in your National Insurance record, but until April 5th next year, so 2023, you can go back further, potentially as far back as 2006. After April 5th next year you'll only go back-, you'll only be able to go back six years which is the standard. But those extra years only apply to those born after April 5th 1951, if they're a man, and after April 5th 1953 if they're a woman. And remember that probably if, if you're around, kind of, the age 45 mark then you're probably going to have enough years so it might not be worth doing this until you're a bit older and check your record again. We had another question from Gary. Oh, I think we might have Sarah back. I'll just carry on talking about the question, Sarah, I-, we've not got any sound I don't think yet.

Sarah Pennells: Can you hear me now?

Clare Moffat: Yes, we can. So do you want to carry on talking through the question?

Sarah Pennells: Yes, I think I'm back in the room. My computer just turned itself off which has never happened but, anyway, there you go, so thanks for holding the fort. But as you say, we had a question from Gary who wanted to know how beneficial it would be to delay taking his State Pension. And, you know, we mentioned delaying taking your State Pension a bit earlier in the webinar but I do think it's worth talking through the numbers as to how much extra you'll get if you don't take your State Pension once you reach State Pension age. So the rules say that you can delay taking your State Pension by as little as you want to, but you'll only get any extra money if you delay taking it by at least nine weeks. If you do delay it by nine weeks you'll get an extra 1% of your State Pension amount for every nine weeks you delay taking it. So if you delay taking it for one year then that works out at just under 5.8% extra, and on a State Pension of £185.15 a week, that works out at an extra £10.70 a week. Now, under the old basic State Pension system, that extra amount that you got by deferring was, first of all, more generous and you could take it as either a lump sum or an additional weekly amount. But under the new State Pension system you don't have that choice. But, Clare, why would someone delay taking their State Pension? What's the advantage of doing this?

Clare Moffat: Well, you, you might still be working. So you receive your State Pension free of income tax, but it's still the first chunk of income when we look at the order of taxation. So then any income you receive from working, well it will just sit on top of it. So say I had part time earnings of £12,000, well I wouldn't be taxed on that because it's under the personal allowance, but if then I reached my State Pension age and I took my State Pension, then that State Pension would come first. It would use up most of my personal allowance apart from about £3,000 of my earnings would then make up to that personal allowance figure but then I would be paying income tax on the rest of my earnings, basic rate tax. So if you don't need it then it might make sense to delay taking it until you do need it.

Sarah Pennells: Are there any calculations though about, you know, breaking even? Putting it crudely, how long you need to live for in order for it to be worth your while delaying taking your State Pension?

Clare Moffat: So there are calculations that, that can put a figure on this. So for example saying that if you live seventeen years it will be worth the delay, but it's actually more complicated than that because it depends on your income tax saving as well. Now, Sarah, we had a question from Karen as well. Now she said that her mum's 67 and she's been getting her State Pension for the last year, she gets £102 a week. She's divorced and she's heard she might be able to use her ex-husband's National Insurance record to boost the amount of State Pension she gets. So what's the answer?

Sarah Pennells: Well, I'm afraid the answer may not be the one that Karen wants, but just to explain why, under the old system before April 2016 man and women could use their spouse, ex-spouse or late spouse or civil partners' National Insurance record to boost the State Pension they received. Now, there are different rules about how you could use that and, and in reality it was mainly women who did this because they were far more likely not to have a full National Insurance record and so wouldn't get that full basic State Pension. So if Karen's mum had reached State Pension age before April 2016 she would have been able to use her ex-husband's National Insurance record if it was better than her own and claim a basic State Pension based on that. Now, her ex-husband wouldn't have received any less as a result of this and he wouldn't have to give his permission for her to use his National Insurance record. Once Karen's mum told the Department for Work and Pensions it should have happened automatically and she'd have received that State Pension for the rest of her life. However, the rules changed when the new State Pension came in, and since then women who reach State Pension age from April 6th 2016, only those women who paid the reduced rate of National Insurance, it's often referred to as the married women's stamp, only those who paid that married women's stamp in the last 35 years are able to use their ex-husband, husband's or late husband's National Insurance record. Now, that reduced rate of National Insurance was actually abolished for new users in 1977, but some women who had elected to pay that married women's stamp before 1977 did carry on doing so.

Clare Moffat: One other point to make is that when a couple divorce, additional State Pension, well, it can be part of the financial assets that are shared on divorce, but this can only happen at the time of the divorce when the financial settlement is being dealt with. Now, this can be a really valuable asset. All pensions are a valuable asset to share on divorce, so don't forget about additional State Pension.

Sarah Pennells: Well, Clare, would Karen's mum be able to pay voluntary National Insurance contributions or is it too late for that because she's already taking her State Pension?

Clare Moffat: No, she can get hold of her National Insurance record and, as we described earlier, if she's got any gaps then she might be able to pay voluntary National Insurance contributions. So as she was born after April 5th 1953 she'd actually be entitled to go back until 2006, remember that option is only available until April 2023 though. After April she would only be able to go back a maximum of six years.

Sarah Pennells: Now, it is also worth saying that if Karen's mum's weekly income is below £182.60 a week, and that's from the State Pension and any private pensions that she may have, she may be able to claim a benefit called pension credit, which was mentioned very briefly earlier on. Now, this is a means tested benefit for people who are of State Pension age or older and it can be worth around £3,300 a year. Now, the pension credit itself isn't worth that much but it's what's called a gateway benefit and it means you're then eligible for other help such as with housing costs, if you're over 75 you get a free TV license and so on. So, it's definitely worth looking into, and again you can do that online on the gov.uk website. Now, we had several questions about your State Pension if you're abroad, so we had one from Gary, Vanessa and Andrew. So, I think we'll look at this one, which was one-, someone who said she has seven years of State Pension from working in countries in the European Economic Area and eleven from working in the UK, and she has twelve years to go before she retires. Now, she says, 'I know I have reached the ten minimum years for the new UK State Pension but is there a way to pay missing years to reach the full 35 for the UK?' So this is what we've just been discussing about-, well you have anyway, about buying voluntary National Insurance contributions, but as you said it's not always the case that paying for voluntary National Insurance contributions will benefit you.

So it definitely is worth checking with the Future Pensions Centre before you do that. Now, we had another question, Clare, about the State Pension abroad which is from Roman, who wants to know about the State Pension-, the UK State Pension being paid in EU countries. What's the situation there?

Clare Moffat: So you can choose to be paid your State Pension into a bank account in any country that you want it to be paid, but your State Pension will only increase each year if you live in the European economic area, so the EU plus another few countries, Gibraltar, Switzerland, and countries that have a social security tax agreement with the UK. So an example of a country with a tax agreement is the United States, so you will get your State Pension increase if you live there. Now, there is no agreement with Australia though, so if you live in Australia you won't get an increase to your State Pension. Now, confusingly there is a tax agreement with Canada and New Zealand, but you won't get an increase there. So I think that highlights that it's worth checking what would happen if you're thinking of retiring abroad and, you know, which country you're thinking of retiring to. Now, if you did move back to the UK though then it would go back to the current rate, so with those increases.

Sarah Pennells: Okay, well thanks very much Clare. So I think we've got some time for some questions, and I know some questions have been coming in although I can't see them as I'm talking to you via my phone. So, Clare, do you want to pick the first question?

Clare Moffat: Yes, I'll-, they're on my phone as well so I'll have a look. So the top question we have in popularity is from Ian and he says, 'How do I find out how many years of National Insurance contributions I've made and if they're sufficient to qualify for the basic State Pension?'

Sarah Pennells: So I don't know whether just to kick off with that, so we mentioned obviously getting your State Pension forecast earlier on, and that's definitely a really good starting point. Because that will tell you whether you are entitled or on track to get the full State Pension because it will tell you what you've built up so far and what you're going to be entitled to or likely to be entitled to or likely to be entitled to once you reach State Pension age. Now, it does make certain assumptions such as normally that, you know, you're carrying on paying National Insurance or being credited with it. But I think it's also really important as well to get your National Insurance record, which I know Clare talked you through a moment ago, because that will actually show you as well whether there are any gaps, and specifically whether you could go back and make up those gaps. Clare, anything else that Ian should think about?

Clare Moffat: No, I think that is probably most things, isn't it? I mean, Ian, sort of, mentioned the basic State Pension but if he's not retired then he'll be on, you know, the new State Pension as we mentioned earlier. But I think, you know, it's always worth finding out whether actually, you know, making voluntary contributions is going to be worth it or not.

Sarah Pennells: Yep, so-,

Clare Moffat: Okay, so the next question is from Karen. So, 'Why is it that you might not get full State Pension when you've got more than 35 years of National Insurance contributions?' Now, I think we've got a few questions that are like this as well, and someone else is mentioning what happens, what's the effect of contracting out, someone mentions a specific scheme. So, just again to, kind of, to summarise that, Sarah, do you want to deal with this or?

Sarah Pennells: Yeah, so as, as you explained when we-, a bit earlier on in the webinar, if you were-, I think the thing that's confusing about being contracted out is that it's not a personal decision because it depends on the scheme you were in and is-, I know you mentioned it's mainly the public sector schemes that were contracted out but it could have been a private sector scheme as well up to a certain point. But you didn't actually as an individual make a decision to contract out, although you would have benefited from paying a lower rate of National Insurance, as would your employer. So I think this bit can come as a bit of a surprise because, you know, if you get your State Pension and you're under the new State Pension system it, kind of, looks like you're not getting full amount but it's just, as we explained earlier on, that you're getting that from your-, basically from the pension scheme that you were contracted out of. So that could be why it looks like you're not going to get the full State Pension, it's just you're not getting the full amount from the state. But as you I know explained, Clare, maybe it just worth, sort of, reiterating, you can make up those gaps.

Clare Moffat: Yep. Malcolm asks, 'How soon before my 66th birthday should I apply?' Guidance is vague and he's heard that it can take months to process it. Now, Sarah, you mentioned about that DWP will send you a letter out a couple of months before your birthday. I suppose the problem is that not everybody lives in the house that, you know-, records aren't always complete and that's why people might wonder, 'It's my birthday today, I've not received my State Pension,' kind of, 'What's, what's happening?'

Sarah Pennells: Yeah, and there were some issues I know at the start of the year with some people have delays to getting their State Pension. So, as I said, the DWP should contact you a few months before you reach State Pension age and if it hasn't contacted you two months from when you reach State Pension age it's definitely worth getting in touch with them because, you know, people obviously wait for their State Pensions. The last thing I think especially in the current cost of living climate people want is to-, is to have that delayed. If they've decided they want to take their State Pension when they can, which obviously many people do, then you don't really want to be waiting for that payment. So I would say it's, you know, if you're a couple of months away and you've not heard from the DWP then do get in touch with them. And then they can tell you how you can claim the State Pension and fingers crossed there won't be any delays to your payment.

Clare Moffat: There's also been a few questions about saying can you get the State Pension earlier than your State Pension age?

Sarah Pennells: Yes, I mean, the short answer to that is no. It is actually something that has been discussed I think off the back of the State Pension age for women rising from, well, as was initially planned from 60 to 65 between 2010 and 2020, and then that was actually brought forward because of the State Pension age rise in both men and women to 66. And there have been various reviews into not just how much the State Pension age rises by in the future but actually whether the system itself needs to be changed in more subtle ways, and one of the proposals that was made a few years ago, I think possibly back in 2017, was that women could elect-, well women and men, sorry, could elect to maybe get a lower amount of State Pension before State Pension age but that was never taken forward. As I mentioned earlier on, we do have another review that's into the State Pension age now and we should get the results of that before next May, so there may be something in there to allow people to take a state-, a lower State Pension early but I don't know that's on the cards. I don't know, Clare, whether you've heard anything?

Clare Moffat: No.

Sarah Pennells: It's certainly nothing people can do at the moment.

Clare Moffat: Same as you, kind of, there's been rumblings about this for, for quite a few years and it does feel like you could have people who maybe are-, have ill health and things like that and they would want to receive it earlier than, than other people. But, yeah, I think we'll wait and see what's in the review that comes out but I think, you know, as you quite rightly said the answer is, no, your State Pension happens at your, your State Pension age. That's the current law. I think quite a few questions about topping up contributions, kind of, when's the right time to do it, and I think just to reiterate, if you do need more than 6 years of contributions and, you know, you satisfy those age criteria, so 1951 for a man, 1953 for a woman, then you've only got until April 2023 to get more than 6 years worth of contributions. So check what your gap is, check whether you'd still be working long enough to maybe you don't need to top up the contributions, because if you're working for another fifteen years then you might be able to fill that gap. So investigate that but do that sooner rather than later, because if you do need to top up more than six years then now is the time to do it.

Sarah Pennells: And I think it is also worth saying, I mean, you mentioned that you may not need to pay for voluntary National Insurance if you're still working and you'll-, essentially you'll be paying them anyway because you're employed or self-employed, but I mentioned pension credit when referring to Karen's mum's situation but also, you know, there is no point frankly in buying extra national-, voluntary National Insurance contributions if that just means you're going to mean you're not eligible for a benefit, core pension credit. So that's also worth looking at and I think that's why it's such a good idea to try and ring the Future Pension Centre because that's what they will-, you know, they will tell you whether it's something that you can benefit from. And I did actually ring them the other day just to check that you can get through on the phone number, and certainly when I tried you can. So we gave you the number in the webinar so that's definitely worth looking up.

Clare Moffat: Okay. So, I think-, I think that, kind of, generally, I think there's quite a theme, a general theme, and I think we've probably covered most of the questions during the session or when we've just spoken about them now. As I said, most of them are, kind of, related to contracting out and topping, topping up. So, yes.

Sarah Pennells: Okay, fantastic. Well, thanks very much for all the questions and thanks to you Clare also for stepping in when my computer decided to go on strike. But before we go I think there's just one final poll we'd like to do. So the question for this last poll is will this webinar encourage you to do something about finding out about your own National Insurance record? So, I can't see what people are voting so, Clare, you're going to have to fill us in here.

Clare Moffat: Yes, okay. So just wait and let people put their votes in. Really high number, definitely, sitting about 94, 92 just now. Some people might be a good idea and 1% or 2% doubt that they will.

Sarah Pennells: Okay, well-,

Clare Moffat: So we'll just give it a minute or two to see if that settles down. Okay, so I think that's probably about us. So 88% said that they would definitely be finding out about their National Insurance record. 10% said that might be a good idea and about 3%, 2%, 3%, still moving a little bit, said that they would doubt it.

Sarah Pennells: Okay, well 88% is fantastic and I would have said, if my computer hadn't died, but I found it so useful getting my own National Insurance record so I'd really-,

Clare Moffat: I said that for you, Sarah, so-,

Sarah Pennells: Brilliant. Well, it is, it's just such a good thing to do so brilliant that almost nine out of ten people say that they'll get their National Insurance record. So thanks very much indeed for listening and to everybody who submitted a question either in advance of this webinar or whilst we've been doing it, and I'm sorry that we haven't been able to answer all of your questions but we will read them all and we will maybe try and incorporate some of them into, kind of, future articles or future webinars. We will get back in touch with you by email in the coming days and we'll send you a link to the recording of the webinar, and of course we'll be doing more webinars next year. So until then, thanks very much for joining us.

On 2 November 2022 our pensions expert Clare Moffat joined the Pension Awareness team for a live session all about pensions and tax. Learn about how pension tax relief works, the limits to be aware of and more.

Join our pensions experts Clare Moffat and Sarah Pennells as they cover the pros and cons of transferring a pension and what you need to know before making a decision. This session was recorded on 5 July 2022.

Sarah Pennells: Hi, I'm Sarah Pennells and I'm the consumer finance specialist here at Royal London. Welcome to this webinar. I'm joined today by Clare Moffat and we're going to be spending the next 45 minutes or so talking about pension transfers. Clare, could you explain first of all a bit about what your job involves? I, I was going to say why you're here but that sounds quite rude. And also why we are talking about pension transfers today.

Clare Moffat: Hi everyone and hi Sarah. So, I'm a pension and legal expert at Royal London. I talk and I write about how pensions work. Now, the reason we're talking about pension transfers is because you all asked for it. We did a poll and this was the top result and we're really keen to offer webinars on subjects that you want to hear about.

Sarah Pennells: Well, I've got a few questions for Clare to get the ball rolling but then there will be plenty of time for you to ask your questions and I noticed that we've got some are already coming in. Now, it's important to say at the outset that we can't answer specific questions if you've got a Royal London pension plan but we can take general questions about pension transfers. So, Clare, you use the term, and I just used it as well a moment ago, 'transfer' but I think people may have heard the term 'combining' or 'consolidating', or 'merging' or 'switching' or 'bringing their pensions together', so do all these various terms refer to the same thing or is there a difference between them?

Clare Moffat: So, all of these terms mean the same thing if, and it's quite a big if, we're talking about moving from one pot of money to another pot of money, what's known as 'defined-contribution pensions' when you know what's being put into it. Moving different pots of pension money perhaps you and your employer have been adding to and putting them in, in one pot, but Sarah, why might someone want to transfer their pension?

Sarah Pennells: I think it's kind of helpful to think about our working lives and the fact that, you know, most of us don't have a job for life these days, and in fact we may not want that. We may have a number of jobs through our working live and the more jobs we have the more pensions we're likely to have to go with it and that can be quite hard to keep track of. I was, sort of, thinking back about my own career so far and I've had seven different jobs, people on this webinar may have had more or less but since automatic enrolment came in you're likely to be put into your workplace pension scheme soon after you join, so you've had a lot of jobs, that could be a lot of pensions to keep track of. So, just to get a feel of everyone's experience here I'd like to do the first of our polls, so you'll see the question coming up on the screen. The question is, how many different pensions do you have? So, please vote in our poll. So, just seeing the-, some of the results coming in, I've, I've-, I voted myself so I said I've got seven different jobs but-, or I've had seven different jobs, I actually have four different pensions from them so that seems to be two to four currently is the most popular answer. Some people have more than ten though I've noticed, which is a lot of pensions frankly. Clare, any thoughts on what we're seeing so far?

Clare Moffat: It's really interesting. I'm surprised that there's actually so many between two and four, I thought we might see a bit more of a split. I'm definitely in that category too, between two and four. I've had five jobs since I qualified, so yeah, but interesting.

Sarah Pennells: And one in five people who voted so far have got between five and seven pensions and, again, you know, that's, that's, that's a good handful of pensions, depending on the kind of person you are it may be easy or hard to keep track of and we'll cover that bit later on in the webinar. So, two, two to four definitely seems to be the most popular answer at the moment. I think it is important to emphasise though that whether you are someone who has two to four pensions or you've got ten or more pensions, we're not saying that just because you have lots of pensions you should transfer them into one. So, I think it's worth spending a bit of time talking about who can't transfer. So, if we have an example of somebody who's a, you know, a nurse or a teacher, or a firefighter, Clare, can they transfer their pension?

Clare Moffat: No, they can't. So, if you work in the public sector and you're doing jobs like those you mentioned or other jobs then you normally can't transfer to another pension and that's because those pensions, they-, well, they don't have pots of money. So, the current pensioners who are receiving their pensions from these schemes, well, their pension is paid from money from taxation and contributions from current employees. Now, there is one major exception in the public sector though and that's if you work for local government, it does have a fund of money and you can transfer out of that one.

Sarah Pennells: But just because you can transfer, presumably that doesn't mean that you should transfer, does it?

Clare Moffat: No, if you're in the local government pension or you've got a private-sector defined-benefit pension, so that's when someone knows how much they're going to receive when they do retire, it's generally assumed to be a bad idea. Now, that's because these pensions make this promise to pay you a regular payment for the rest of your life. Now, it's almost like getting your monthly salary except you'll get less, of course, and if you've got a husband or wife and they live longer than you then they will get a regular payment for their lives too, so that's a really valuable benefit to have.

Sarah Pennells: So, in this webinar we're gonna be concentrating on pension transfers if you have a defined-contribution pension, so that's the kind of pension that we and other pension providers offer. It's a pension where you build up a pot of money while you're working that you then can take an income from when you retire but if you have a final salary or another kind of defined-benefit pension and you'd like to find out more about that then the MoneyHelper website does have a guide to what to think about if you want to transfer a defined benefit pension. Now, MoneyHelper is an impartial website that's backed by the government so you can find a guide there. So, there are I think a number of reasons why it can make sense to transfer, now we're not gonna tell you what to do because we're not financial advisors but we will go through some of the most common pros and cons. So, one reason for transferring your pension is for lower charges, namely if the pension provider that you're moving your pensions to charges less than you're currently paying. I think, Clare, the question that, that, sort of, follows from that is how do you find out what you're currently paying in charges if, say, you've got two, three or four different pensions?

Clare Moffat: So, all pension providers apply a yearly charge for managing your pension and this is known as the annual-management charge, or you might see it as AMC. Now, that's taken automatically, so once a year or once a month, from the value of your pension savings. Now, I know that this might seem really complex but comparing the charges on your pension is important. Now, that information can be found in a variety of places, so perhaps online in the key features document, which would be the document you will have been given when you joined the pension, in the annual statement you'll get from the pension provider. It might be on the app if your pension provider has one. Now, if you have a workplace pension then the charges for the default fund, now that's where most people would be, have to be 0.75% or less of the total pot size. Now, the default fund is the fund that you will have been put into when you're automatically enrolled.

Sarah Pennells: But what does that mean? I mean, percentages aren't necessarily the easiest to compare.

Clare Moffat: Yeah, you're right. Actually percentages don't mean much to many of us because we actually like to see a pounds-and-pence amount but we do need to be able to compare the percentage of one scheme to the percentage of another scheme. That upper limit of 0.75% on charges, well it would mean if you had, let's say, £10,000 in your pension fund you would pay no more than £75 as an annual-management charge. Now, many providers with modern schemes will charge a similar percentage but you might have older-style, perhaps, personal pensions and they might be charging a lot more. And in fact one of the great things about workplace pensions is that they're generally quite transparent, so it's quite easy to see what charges apply, and that's that AMC that I just mentioned. Now, this is precisely to help people see what their charge is, even if they're not pensions experts.

Sarah Pennells: Okay, so say you have a workplace pension and you're gonna transfer other pensions, could you end up paying the same on all those pensions you transfer or could you end up paying more or indeed less?

Clare Moffat: Well, it can't be guaranteed but, as I mentioned, the default fund in a workplace scheme has to charge 0.75% or less as that annual-management charge and many are less than that. So, in a workplace pension everyone in the scheme pays the same charge as a percentage of how much money they have in their pot, so that's particularly beneficial to those people who don't have a huge pension pot at the moment. So, maybe they're young, maybe they've had career breaks or perhaps have started saving later, whatever the reason. Now, if you aren't in a workplace pension then one of the benefits of putting all of your pension money together is that often, well, the more you have in your pension pot the lower the charge as a percentage.

Sarah Pennells: So, this is quite a lot of information about charges we're sharing. How would that work in practice?

Clare Moffat: Okay, so let's think of an example. Say you have four pots of pension money from the past, from other schemes you've been in. Two of the pensions have £10,000 in them, one has £40,000, and another has £50,000. Now, you might be paying around 0.70% in charges for each of them so that would add up to £770. So, you might think, 'Well, there's no point in combining them.' But if you put them altogether in one of the pots you might only pay 0.50% in total because you have over £110,000 in one place, so that would be £550, so that's, that's a real saving. A pension provider might charge 0.70% in charges if you've got up to £100,000, but then it would reduce to 0.50% if you've got over £100,000, for example. But these rates and thresholds will vary from one pension company to another, so you would need to investigate and make sure that you aren't moving from a cheaper pension to a move expensive one.

Sarah Pennells: Okay, so let's look at another reason why you might want to transfer and that is the options that you get at retirement, so what might that include?

Clare Moffat: Well, some workplace pensions don't offer as much choice about how you can take money out of your pension at retirement. Now, they might only let you take all of the money out in one go so that could-, that could, could mean that you're actually paying a lot more tax than you should or they might only offer the chance to buy an annuity and that's when you use all of your pot and you convert it into a regular income for your and maybe your husband or wife's life. It might also not offer something that's called 'drawdown'. Now, ignore the terminology. All that drawdown means is that your pension money stays invested in a pot and you can take your tax-free cash and then you can maybe take some money monthly, like an income, perhaps because you've actually stopped working. Or you might just want to take your tax-free cash and leave the rest invested because you're still working and you don't actually need any monthly income. Or you might just want to take larger sums every now and then, so that might be because you or perhaps your spouse has one of those defined-benefit schemes we mentioned, and that could give enough monthly income for you for the everyday bills, but maybe you just want some extra money from time-to-time, so maybe for holidays or a new car, or, or for Christmas presents. Some pensions, well, they also might not offer the same choices to your family if you died and that could be really important to you, but, Sarah, what about the faff factor? This possible hassle of having different pots of money with different providers. Is that a genuine reason to think about transferring your pension or are there ways to streamline your pension admin?

Sarah Pennells: I think the faff factor is a really interesting one and I do-, I do believe it's a personal decision and for some people it can make a big difference having their pensions all in the same place, they can see exactly what they've got and having them dotted around could be a real barrier to thinking about their retirement but for other people it just isn't a problem at all. It is worth saying though if you are somebody who finds the admin a bit of a faff if you have your pensions dotted around, there is something called the Pensions Dashboard which is being rolled out from next year. Now, that's going to be an online dashboard that means you'll be able to see all your pensions in one place, even if they're from different pension providers. So, we've talked about charges, we've talked about the faff factor. What about investment choice, Clare?

Clare Moffat: Well, Sarah, it is important to remember that when you save into a pension your money is invested and different providers offer different investment options and you could benefit from a wider choice on where to invest your pension savings if you transfer.

Sarah Pennells: That's a good point but it's also worth thinking-, worth thinking about what your workplace pension offers. You mentioned, Clare, earlier on that most people who are in a workplace scheme are in the default fund and that's because that's the fund that you're put into if you don't actively decide to go elsewhere, but your workplace pension provider will offer funds as well, so that could be your starting point to look at what they offer. Having said that, some people do like the idea of actively managing, choosing their investments, and may want to transfer but bear in mind there may be additional investment charges that come with it.

Clare Moffat: That's right, Sarah, and you can think about the type of investment options based on your needs and objectives so, like, thinking about a provider's approach to responsible investment and environmental, social and governance factors. Now, these help investors measure the ethical and sustainability impact of a business or sector but it's important to repeat the point that your pension is invested and its value can go down as well as up, so there's no guarantee that combining your pension will give you a higher income when you retire or a bigger pension pot, because you could get back less than you pay in.

Sarah Pennells: So, we talked about some of the reasons why it might be worth thinking about transferring but let's look at some of the reasons why transferring may not be a good option or some of the things that you need to check before you think about transferring. So, there's a range of valuable benefits that some of the older-style pensions might have had. One that people may have heard of is called a guaranteed annuity rate. What's that?

Clare Moffat: That's right, Sarah. There are valuable benefits sometimes and combining your pensions can seem like a really good idea but you need to check that you aren't losing something that's really valuable. Now, you mentioned guaranteed annuity rates. You wouldn't see these on a modern pension but it was quite common in the past, especially in the 1980s and 1990s, so you might have it. Now, this is a guaranteed minimum level of income that a pension provider will pay when you start taking your pension savings and you convert your pot into a regular income for life. So, it's generally going to be higher with your existing provider than the rates available in the market when you retire.

Sarah Pennells: What are we talking about here? Are we just talking about a few extra pounds a month or could it be an extra chunk of money that's quite sizeable?

Clare Moffat: Well, I mean, it all depends on how much money you've got in your pot. So, common rates offered are around 9 to 11%. I, I have seen higher than that as well. Now, that's about double the best rate that most people can achieve now. So, well, what does that mean? Well, it means that for every £100 in the pension pot that you have, you get £9 or £11 as income a year compared with £5 for every £100 that you would get based on today's rates.

Sarah Pennells: Okay, so when else should people be careful?

Clare Moffat: Well, tax-free cash, that's definitely another one to think about. Now, that's the money you can take as a tax-free lump sum when you begin to take your pension. Now, it's currently set at 25% of the funds and I think it's something that most people are quite familiar with but some older pensions might allow you to take out a higher percentage of tax-free cash. Now, in some circumstances you can transfer this benefit to your new pension.

Sarah Pennells: What about the age that you can take your pension? Does that vary from provider to provider, or is that solely governed by rules and regulations?

Clare Moffat: Well, currently your can't take money out of your pension before you're 55 unless you're seriously or terminally ill, and that will be 57 by 2028, and that is a regulatory-, you know, that comes from legislation. But some people do have the right to take it earlier, now that could be because of the type of job you did and you can keep this, right, if you transfer, but some rules do apply. If you're taking financial advice it is really important here to make sure that you don't lose this right. Now, of course it doesn't mean that you have to take your pension when you're younger, it just means that you can if you want to. Now, you might have also heard of something called a loyalty bonus and normally to get that bonus you have to keep the money in that fund. Another one to watch out for is if you're currently an employee and you don't want to stay in an employer's scheme then you'd need to check that any employee benefits like a contribution from the employer, if you would still get that if you moved to another pension, because you wouldn't want to lose out on that. So, financial advice can be crucial on working out whether you'll lose valuable benefits or perhaps if you can transfer but still keep these benefits.

Sarah Pennells: And there's another idea why keeping your pensions where they are could be a better option, isn't there?

Clare Moffat: Yes. If you've got any pensions below £10,000 and you might want to take money out of them, so you're at the age where you can access your pensions, but you would still want to save into pensions, then transferring into one big pot might not be a good idea for you.

Sarah Pennells: So, what happens if you've been through the pros and cons and you think, 'Right, I want to transfer one or more of my pensions,' can you just go ahead and do it?

Clare Moffat: No. So, there are some situations where you must get financial advice before making a pension transfer.

Sarah Pennells: And what-, why is that? Why do you need to take this financial advice?

Clare Moffat: Well, it's worth remembering that these rules are designed to protect people from being worse off by transferring, so these rules apply if you've got a defined-benefit pension, we spoke about them earlier, that's worth £30,000 or more, and you want to transfer to a defined-contribution pension. So, that's going from where, you know, you're being promised a certain amount on retirement and you want to move it to where you're just going to have a, a pot of money, and it's up to you with what you do at retirement. A defined-contribution pension that's worth more than £30,000 but with a guarantee about what you'll be paid when you retire, so we just discussed that a moment ago, and you would lose this benefit by transferring, so that's the-, kind of the two situations there.

Sarah Pennells: Okay. Clare, I think that's really helpful and I'm aware that we've thrown a lot of information around about charges and pros and cons, and things to think about. So, let's just do another poll before we move onto questions. It's 'who has thought about combining your pensions'? Please vote now in our poll. I'll just leave it a moment while the results come through, so-, okay, well in some ways I guess it may not be surprising bearing in mind this webinar is all about pension transfers, but 95% currently have thought about transferring-, just slipping slightly as I'm talking, so about 5/6% say they haven't but the vast majority have thought about it. As I said, obviously, this is a webinar about pension transfers so it kind of makes sense but we'll just give the results a moment to, to, to settle still. Any thoughts, Clare, on that? On the fact that that percentage is-, well, it's pretty high, isn't it?

Clare Moffat: It is quite high and I'm not surprised because I often get asked questions by my own friends actually when they're talking about they've moved jobs, they don't really understand how things work, and can they move all of their pots together? So, I think it is something that often we want to, you know, think about different admin elements of our lives and how we can make it better but we are a bit worried about, well, you know, might we lose anything? So, it's definitely something that we are asked a lot about.

Sarah Pennells: Yeah, okay. So, it's settled down. 94% said they had thought about it and 6% haven't. So, Clare, you mentioned a moment ago, just before we did the poll, about getting financial advice, why it's a good idea to get financial advice and what you could lose by not having it. So, is it a good idea to get financial advice from an advisor if you are thinking of transferring your pension, no matter what the circumstances are?

Clare Moffat: Well, an advisor will consider your whole life. They'll look at your needs, wants, income, the type of risk you're willing to take and they'll-, they can also look-, if you've got a spouse, they would look at both of your lives. They would then look at potential solutions and we're not just talking about, you know, pensions here, we would be talking about different investments as well. They'd look at pros and cons before drawing up a list of options and providers, and making a recommendation. But if you're younger and you've only got small pots of pension and you're not likely to have some of these, these benefits that I've mentioned earlier, then, you know, it, it might be more difficult to find an advisor and it's more likely, as I'm-, you know, it's more likely you're not going to have some of these guarantees and you're only going to have these defined-contribution pensions. So, in that situation then it's probably easier just to try and look at your pensions yourself, compare them, look at the charges, and work out if transferring is a good idea. But as your pots grow over the years I would always recommend financial advice. Now, I, I mentioned the legal requirements for getting advice when you make a transfer and, and at Royal London we really believe in the value of financial advice. Even if there isn't that legal need, you could benefit from taking advice before making a transfer.

Sarah Pennells: Great stuff. Well, thanks very much Clare. So, we've had loads of questions coming in, which is fantastic. Thank you very much first of all for submitting your questions. So, I'm gonna go down from the most popular ones and work my way down, so the first question I think I'll take actually, that's from Susan and it says-, Susan says, 'I think I had a pension with my old employer but I can't find the paperwork, how do I find out if I have any money in it?' And Susan, it's a really good question and it's one I think, again, that lots of people have. So, there's a couple of thoughts on that. Firstly, if you know who your employer is and that's not meant to be as stupid as it sounds, I mean, your employer may have been taken, taken over. So, if you've got contact details for your employer then contact them, you don't necessarily need to have pension paperwork for them to find out whether you've got a pension with them or not, so that's one option but if you think, 'Well, actually it was so many years ago I don't even know who the employer is or I don't know who the pension provider is,' then there is a, a government website or government service called 'The Pension Tracing Service' which is completely free to use and if you go onto the gov.uk website you'll find that what comes up is basically you can type in the name of your employer or your pension provider, so the last name that you knew for them and it will give you the up-to-date contact details. So, what this service doesn't do is basically scurry around and find out if you've got a pension and tell you how much it is, but it will give you the up-to-date contact details either of the pension company or the employer but you can then contact them.

It is worth saying that if you're looking for the Pension Tracing Service, do make sure you go onto the gov.uk website because there are sometimes other services that may charge you but the government service is free to use. Clare, I don't know whether you've got anything to add to that whilst I just take a quick look at the other questions that are coming in.

Clare Moffat: Yeah, no I think just the same that it's-, I think there's a few questions that are, kind of, covering off this actually that, you know, people lose track of their pensions, you move house, you try to, you know, tidy up, get rid of paperwork and things so this is-, you know, it's, it's not uncommon at all. Now, it will help when we do have the Pensions Dashboard because we will be able to see those pensions that we have in one place but definitely, as you mentioned, you know, if you-, if you can't find or you know you had pensions but you can't find any information, then that's a great step to take.

Sarah Pennells: Good stuff. Well, we had a couple of other questions from people that were along similar lines, I think Robert and Douglas, so hopefully we've answered that for you as well. So, we have another question now which is from Mark and he says, 'Hi, I want to make it easier for my wife if I die first. Is that a good reason to put all my pension pots together?'

Clare Moffat: So, I would think, you know, that's a bit-, thinking about almost, like, making admin a bit easier. Now, I think lots of us-, well, I do all the finances in our household, so that was definitely a reason when I was thinking about this that, you know, I kind of thought, 'I do all the finances, if I died tomorrow my husband would have no idea,' so not only did I want to, kind of, write down everything that we had and make sure that he would know but I wanted to, kind of, streamline it a little bit and make sure that he understood. I, you know, there's also reasons why that sometimes, you know, I, I mentioned that the death benefits might not be as good in, in one pension as in another pension, so that's another reason to have a look at it. So, I, I definitely think it's a reason to look at it. It comes back to that, you know, the, the same story, make sure you're not losing any valuable benefits, you know, just double-check everything that there is but, you know, it's, it's certainly a valid reason, to make sure that when the most awful thing happens then life is made a little bit more easy on the admin side.

Sarah Pennells: Yep. So, as you say, there are definitely things to think about that you, you know, to make sure you don't lose valuable benefits, some of the ones that we've outlined but also possibly worth considering, and I think maybe one other thought which is just around death admin, to give it a very, sort of, not very pleasant term. But actually thinking about making life easier for those you leave behind. And I think these days because so many of us live our lives online, certainly our, you know, our financial lives are often online, it's having that record of what you have, so it doesn't obviously mean passwords and things but, you know, accounts that you have and, you know, pensions that you have so that whoever is, is left behind and, and has to sort out the legal and financial affairs at least knows what you had. It's, it's something that I think if you've been through it you realise how useful it is, if you actually know what you're supposed to be dealing with rather than trying to track down things as well. So, that would be maybe just another thing to, to think about. So-,

Clare Moffat: Yeah. Probably just one point just to mention as well, I take this opportunity that remember to keep your expression-of-wish forms up to date, so it can be called different things for different companies but that's the form when you would say what you would like to happen to your pension when, when you die. So, make sure-, I've often seen these forms that are twenty years out of date so, you know, make sure you put down what you would like to happen. Yeah.

Sarah Pennells: That's a really good tip. Now, you've said it can be called different things, are there any other common names that people might?

Clare Moffat: Yeah, so sometimes 'benefit nomination', yeah, so you'll just, kind of, see different things. They would probably be the most common that you would see.

Sarah Pennells: Yep, and I think it's a really good tip because sometimes people think about updating their will if-, if they have them in the first place, they think about updating their will if their personal circumstances change but because their pension doesn't form part of their will they're not necessarily thinking about updating their pension wishes, so good tip. So, we've had an anonymous question in now which is 'I want to take all of my tax-free cash out when I'm 55 but I don't want to pay any tax as I'm still working. Can I keep different pensions and take all of them?'

Clare Moffat: So, the answer to that one is if you-, you know, I mentioned that, kind of, drawdown term that if you moved into drawdown then you could take 25% tax-free cash and then leave the rest invested and not take any of that, so you wouldn't be paying any tax because as soon as you start taking income then it does just sit on top of your taxable income-, taxable earnings. So, you know, a lot of people as soon as they can access their pensions will take only their tax-free cash and move the rest into drawdown. Now, you've mentioned keeping different pensions. You can take that from each of them. So, say you have three different pensions, if they all allow moving into drawdown and keeping some of it invested, or it might be that you are taking the tax-free cash and buying an annuity, it, kind of, you know, it depends, but if you're still working then you could take 25% of each of those different pensions. So, they are just three defined-contribution pensions you can take your tax-free cash and then leave the rest invested in drawdown and that means that you just then start taking the income when you stop working or when you need to take it so you're not going to be taxed because you're only going to take the tax-free cash.

Sarah Pennells: And I think it's just worth maybe, sort of, repeating. So, it might sound obvious but the tax-free cash means what it says on the tin, that is tax-free, and if you just take that it doesn't matter how much you're earning, you're, you're going to not pay tax on it.

Clare Moffat: Yes, that's correct. There, there is another way to take money from pensions when you can take a kind of cash lump sum but the problem with taking that is there's 25% that's taxed at zero but the other 75% has to come with it and so then that is taxable income, so that doesn't work if you don't want to be taking that income and if you don't want to be paying tax.

Sarah Pennells: And one other thing you mentioned, you said that if you go into drawdown-, I'm just aware that we're, sort of, throwing around some, some bit of terminology here. So, you said if you go into drawdown, so that's where you can take bits of money to generate an income, for example, that-, but-, and not the tax-free cash, you said it sits on top of your income, so just explain what you mean by that.

Clare Moffat: Yes, so if-, say I earned £40,000 a year and I wanted to take my 25% tax-free cash from my £100,000 fund. So, I can take £25,000 but if then I decided to take some income then and if I wanted to take, say, £15,000 and that £15,000 is going to sit on top of my £40,000 of earnings, so it's going to be putting me into the higher-rate tax bracket, which probably is not what I want to be doing. Normally you want to be, kind of, making sure you're paying the least tax possible, so that's what happens. As soon as you start taking the, kind of, income amount off that then you're going to be taxed on it. Now, you don't have to take if you've got £100,000 in your pension fund, you don't have to take £25,000 and then leave the rest invested. You can, sort of, take a little bit of tax-free cash at a time, so you could maybe take-, we'll have, sort of, £10,000 of tax-free cash just now and some of that money moves into drawdown. Or you can, you know, just, kind of, work it out like that and it depends if you're working, if you're not working what you want to do.

Sarah Pennells: Yes, so it's important to say just because you can take 25% tax-free, you don't have to take that in one go.

Clare Moffat: Definitely.

Sarah Pennells: Okay. So, we've got another question that's come in from Lisa who says, 'Can I transfer money from pensions to a pension that I'm no longer paying into?'

Clare Moffat: So, yes, it's just about assessing the different pensions and looking what they all offer, so perhaps there is a pension that you think-, so, you know, it's perhaps one you've had in the past and you think, 'Well, actually that offers me something that the pension I'm in currently doesn't offer.' As long as that pension is still open-, so if it's an older pension scheme sometimes they do shut them so you just have to, kind of, check that that's still available. Also if it's a bit older, are the charges higher? So, it's just about looking and trying to compare the different pensions on a, kind of, like-for-like basis. What are the charges? What does that offer that I'm not getting just now? But as long as the pension scheme will accept that money then you can move into it.

Sarah Pennells: And this may sound like a stupid question but you mentioned that some of the older-style pensions, they may have closed, would you have been told about that, is that something you'd know about or would you just find out if you asked if you could transfer?

Clare Moffat: Yes. You normally would have been told because they would really say, 'We're no longer accepting contributions,' and the reason they might have closed is because they actually setup a new, kind of, auto-enrolment, perhaps a new workplace pension scheme that just works a bit differently or perhaps that provider has been taken over by another provider. There's lots of reasons why they might close. Now, I am talking about the defined-contribution world here so that is when we're thinking about those pots of money, and if it's a defined-benefit pension that you're mentioning then defined-benefit schemes will not allow any money to be paid into them, most of these schemes are closed. If it's a public-sector scheme then you can't transfer any money into that. So, you know, when I'm answering that question, I should have made that clear probably earlier, it is thinking about that defined contribution, that pot of money that you grow that I'm talking about there.

Sarah Pennells: So, the earlier example we mentioned, sort of, almost at the start of the webinar of the, kind of, the nurse, the firefighter, the teacher. If you had a pension there you couldn't transfer your, sort of, defined-contribution pots into that kind of pension?

Clare Moffat: No, you can-, you can transfer it. Say, you're a teacher, you can move into another public-sector scheme sometimes if you move to a different part of the public sector but not-, you cannot transfer from one of these kind of pots, like defined-contribution schemes, into a public sector. And also for private sector DB schemes then most of them will not accept any money in. That would just be, kind of, standard practice.

Sarah Pennells: Yeah. Great stuff, thank you. So, we've had an anonymous question which is, 'What would happen to my pension pot when I die as I don't have a partner or children? Does it just die with me or can I allocate beneficiaries?'

Clare Moffat: So, again, if we're thinking about this defined-contribution world where you've got this pot of cash then you would nominate-, in that form I mentioned, you would say who you would want to receive the benefits. So, that could be anyone. You can pick whoever you would like to receive the benefits. It can be an individual, it can be a trust. It has to be a living person or a trust, though I have seen someone's dog be nominated and that is not allowable. So, (talking over each other 35.21).

Sarah Pennells: My dogs would love that if they got their pension.

Clare Moffat: I know. I know. You would have to nominate someone to look after your dogs if, if that was the case but yeah. So, you can choose who would receive them. Now, the only thing I would say is that sometimes when you're in an older workplace pension scheme there are scenarios where it's only a spouse or a partner who'd benefit on your death, and that fund would be used to buy an annuity for them. So, double-check, because death benefits are important to people. If it's a kind of modern scheme you'll have the full choice that the law allows but some older schemes, they had the, the, the capacity to change, the law allowed them to change, but it was kind of easier for them to, to run as they did. So, it might be the case that if you didn't have a partner or children, then it wouldn't go to anyone. So, double-check what type of pension it is, you know, but if it's a modern kind of it's a workplace pension, for example, that your employer pays into, normally they would allow that pension pot to be paid to anyone, so you would just choose. So, it's really important to keep your expression-of-wish form up to date though.

Sarah Pennells: So, thanks Clare. So, we've got a question from Janelle who says, 'Will the Pensions Dashboard help people locate old pensions and when will it go live?'

Clare Moffat: So, it should be able to help, that's the idea is that actually people are going to be able to see what pensions they have and it's, you know, also going to have the state pension as well on it. So, it should be a really useful tool for people to see in, kind of, a snapshot what will happen. When will it go live? Well, that's probably a good question. I think we're looking at it starting to go live from 2023. It depends and not-, you won't see everything on it to begin with, so larger pensions will go on that first, especially if you, you know, are, kind of, have public-sector pensions for example then, you know, they'll be going on but you might find if you're in a, a kind of smaller, perhaps an old private-sector defined-benefit scheme then that might take a couple of years longer to go on, for example.

Sarah Pennells: Yep, so I think it's important to say it's kind of going to be a bit of a phased roll out, isn't it? So, you're not necessarily going to see everything from day one, but we will probably start seeing more publicity about it ahead of the, the beginning of the roll out next year, so I think we'll, we'll definitely be hearing and seeing a bit more about the Pensions Dashboard. So, thanks for your question, Janelle. I've got a question now from Paul who wants to know, 'Can I transfer a pot worth over £30,000 from another pension provider?' So, I think this is going over something that we talked about pretty much at the start of the webinar.

Clare Moffat: Yes. So, that's-, so, yes but if you are transferring it and it had some of these, these benefits, so we mentioned this scenario where it was a, a defined-benefit scheme, if it was over £30,000, or if it had a guaranteed annuity rate, then you would need to take financial advice. If it's not, if it's just another, say, workplace pension scheme that's defined-contribution, so it's that pot of money, then you wouldn't need to take financial advice, so you can just move that quite easily.

Sarah Pennells: Okay and two things to say on that, so you mentioned if it was this, this pot of money, a defined-contribution, an older-style one where it might have valuable benefits. So, is that something that, you know, you would be able to find out by looking at the paperwork or ringing the pension provider, or is that something a financial advisor-, how would you know whether you would need the financial advisor in the first place or could you just not do the transfer?

Clare Moffat: That's a great point. Your paperwork should be able to tell you, if it doesn't tell you then the provider will be able to tell you, so it's worth giving them a phone to find out.

Sarah Pennells: Great stuff. Well, thanks for the question Paul. Michelle has asked a question saying, 'I have two pensions that I no longer contribute to, can I transfer them into an active pension pot?'

Clare Moffat: Yeah, so I think that's, you know, what we've just covered. It depends what type of pensions, if they are just defined-contribution pensions with no guarantees then you can easily move them into your other pension pot but, you know, back to what we said at the beginning, make sure you're not losing any valuable benefits, make sure you're comparing the charges. If your active pension pot is likely to be, you know, especially that will be if it's a workplace scheme then, you know, it has to be under that 0.75% for the default fund. It might be the other two pensions you've got are personal pensions, they might be higher charges, so it could save money on charges moving into the new one, but just double-check what those two pensions are. So, again, just look at your paperwork, if it's not clear phone up the provider, they will be more than used to dealing with questions on this.

Sarah Pennells: Great stuff. Okay. Thank you for that, Michelle. And we've got another question which is from Sally saying-, and she asks, 'Do I have to be over the age of 55 to transfer my pensions?'

Clare Moffat: No. So, you can transfer your pension at any point in, in time. You don't have to be over 55, you just have to be over 55 to be able to take money out of your pensions, so your tax-free cash or to start any-, taking any income. So, that's-, that-, what that 55, which will be 57 in 2028. So, again, that's not something that I think is-, you know, we've seen some stuff in the press about it but it's one to be aware of for the younger people who are listening that they might not be able to access until 55 but for transferring, you can transfer at any age. So, if you are 25 and you've, you know, you've moved to your second job then you can move the pot of money you had from your first job, for example.

Sarah Pennells: And it is just probably worth reminding people about one of the benefits that you said it was a good idea to check about which is the age at which you can take your pension, as you mentioned there the age being 55, rising to 57 by 2028, but with some pensions they may have slightly different rules so, again, just a reminder to check not just charges and investment choice but also the age-, the-, and the valuable benefits but also the age at which you can take your pension. So, a really good question. Thanks very much, Sally. So, onto the next question which is from Allison and she'd like to know, 'If my employer changed the workplace-pension provider, can I transfer my pot from the old workplace-pension provider to the new provider?'

Clare Moffat: So, if your employer is changing the pension provider then that's-, they're kind of moving everybody from, from one provider to the other, so it's the employer setup the scheme and it's just the provider that's changing, so you shouldn't actually have to, kind of, physically do anything in, in, in, you know, in that situation but they should be giving you information. So, your employer will be talking about, kind of, what's happening and what this process means for you. So, I'd have a look at anything that's coming out paperwork-wise just so you know, kind of, what's happening.

Sarah Pennells: Okay, thank you. So, we've got an anonymous question, I, I think it's a really good one as well though which is, 'Where can I find a financial advisor?' So, do you want to make a start on that one, Clare?

Clare Moffat: Yes, so, I mean, there is different places you can look, there's different things like, kind of, Unbiased, there's different organisations you can look at to try and find a financial advisor who's use local to you, you know, it's worth doing, you know, kind of, researching this because-, and, and even meeting up with some people. Because if you're going to get financial advice they are going to look at all of your life, you want to build up a relationship, this could be someone that you're going to see for a long time. So, actually spending the time and finding someone that, you know, actually you can kind of like and you trust then that's important. But I do know it feels tricky sometimes, people are like, 'Well, I don't know anyone,' but it's good to sometimes ask friends and family as well but there are different sites that you can use to try and find a, a, a financial advisor as well.

Sarah Pennells: Yep, and you mentioned Unbiased, that's one website and there are-, there are other places that you can find a financial advisor, so I think it depends a bit on what you're looking for and maybe what stage of your life you're at. So, the MoneyHelper has a, a directory of advisors who specialise in retirement, there's another website I think called VouchedFor which is-, has reviews of customers of, of providers and I think the Personal Finance Society has its own directory. Now, we've got an article on RoyalLondon.com which talks about where to find a financial advisor and also there's one that talks about the kind of things to think about before you see an advisor. And you mentioned, Clare, about, you know, meeting or talking to and advisor and why it's important to do that, and I agree, I think it's something that, you know, it's not the kind of thing that most of us do very regularly and it can be a little bit daunting but I think it's a good idea to, sort of, think about the kind of questions you want to ask and, sort of, maybe treat it a bit like a job interview because, as you say, you could be having this professional relationship with somebody for a very long time and you could be telling them quite, you know, quite personal stuff about what you think about money, what your goals are, what your aspirations are, as well as how you spend your money. So, definitely spend a bit of time talking to the advisor and getting a feel for them as well as, sort of, looking at things like, you know, sort of, the areas they specialise in. That would be my, my, my tip. Okay, we've had-,

Clare Moffat: Yeah but-,

Sarah Pennells: Sorry, go on Clare.

Clare Moffat: I, I was just going to say that if you're a couple looking for financial advice, it's important that the two of you actually, kind of, find someone you're both happy with because, you know, if-, when the death of a partner happens your financial advisor can take on loads of the admin involved in dealing with things like death and, and other things that have to be done but you want to make sure it's someone that both of you trust and both of you feel comfortable. So, I think that's really important, kind of, on a family basis to have someone, not just someone who, kind of, you know, one person likes or trusts.

Sarah Pennells: I think that's a really good tip, even if one of you tends to take a bit more of a lead in certain areas of finance because we often find that, you know, maybe couples divide the kind of financial side of things. So, even if you're a bit less involved, for example, it's still important to go along, so a really good tip. So, we've had another question, this one is from Seraphine and-, who wants to know, 'Can you transfer only to your current pension scheme or can you transfer to old schemes if they're more beneficial?' So, I think we've, sort of, covered this in one of the earlier questions but I think it's really worth reiterating as well because this is important stuff to get right. So, what's the situation, Clare?

Clare Moffat: So, if schemes are open then you can normally transfer to them, so that's, you know-, and when I say schemes I just mean pensions. So, it's just about checking that if it is going to be more beneficial, if you think it is more beneficial, then they just have to be able to accept the money, so that's it.

Sarah Pennells: And just, just to recap on some of the things we talked about, so we talked about charges, we talked about options at retirement, tax-free cash, investments, and the age at which you can take your pension, I think.

Clare Moffat: Yep, yep.

Sarah Pennells: And then also you mentioned some of the areas that people need to look at to make sure they're not gonna lose those benefits, you mentioned the guaranteed annuity rate and also the loyalty bonuses were a couple that, that you mentioned. So, definitely worth doing all those checks or talking to a financial advisor even if you can transfer, so-,

Clare Moffat: Yeah and you don't need to move, you know, say you've got six pots you don't have to move them into one pot, that's, you know, it's, it's not about doing that either. Sometimes you can actually-, you know, if you decide, 'Well, actually I quite want, kind of, money in this for this reason or I want it-, and sometimes you have to, in certain scenarios-, to do with those valuable benefits I spoke about, sometimes you have to open a new pension scheme, which is just the way, kind of, the law works. So, there are situations where even if you decide to, you know, to transfer your pensions perhaps because it's going to make the admin better, the charges might be lower, you might still end up with not just one scheme but you might end up just with, you know, a couple of pensions.

Sarah Pennells: Okay, good stuff. So, we had a question from Michelle. Again, I think we may have covered this but it's always worth reiterating, which is, 'What type of pensions can be grouped together? As in-, and, and she says, 'NHS/council pensions.' So, I guess that's, kind of, which kinds of, sort of, the similar, similar kind of pension.

Clare Moffat: Yeah, so when we think about NHS and council pensions, they come under that umbrella of public-sector pension schemes and so I would, kind of, think about them as a group and then we've got private-sector defined-benefit schemes which are similar in that they've got that kind of promise to pay. You won't find many of them open anymore but you might have them from the past. And then we've got defined contribution which is, you know, most modern schemes, most people starting a job now that's what you would have, you pay in, your employer pays in, of course you get the benefits of tax relief as well, and then at the time you start taking pensions it's up to you to manage how you take that money out to last until you-, until you die or until your spouse dies or how-, you know, what you would like to happen. So, that's kind of how I would think of them in, kind of, groupings. When I spoke about the public sector, just as a reminder, most public-sector schemes you cannot transfer money out of them, they are not funded, there's no pot of money that can leave the scheme so that's not how it works. You'd, you'd stay in those, so even if you leave-, say you are a doctor in the NHS and you stop working in the NHS and you go to be a doctor in the private sector then your NHS pension is still there, it doesn't go away and you can access it at retirement, but you can't move it anywhere else because of it being in that. If you've got a council or a local government scheme then theoretically you could move it but that promise to pay is, you know, it's a very valuable benefit so that's, you know, and you have to take financial advice on it, and actually for most people having a guaranteed benefit like that which goes up every year is worth its weight in gold.

Sarah Pennells: Yeah, good point. So, we've had another question which is, 'I got divorced from my husband and I get some money every month from his pension. When I stop work, can I move that money into my other work pension?'

Clare Moffat: So, this is an interesting one and it opens up a huge can of worms about divorce which I could go on about for ages and you really don't want to hear me talking about that at length now. I think from, from this question it looks like that when you got divorced there was an arrangement setup and it would have been called an 'attachment order' or an 'earmarking order' that you would get, say, for example, 50% of your ex-husband's pension when he retired, and so every month money comes into your bank and that's from his pension. Now, legally he still owns that pension, you're just getting some of that money out, so you can have that-, you know, move that into your other pension. But even if it was a different type of way in which pensions are dealt with on divorce, called pensions sharing, that-, what happens then is you, you would own the pension, so you would say get 50% of the fund, so that pot of money, and you can do, you know, what-, you move it to where you want it to be and then when you take it, at age 55 or whenever, it's up to you to, you know, to choose. But there are complications with pensions. So, you can't just maybe move it into the same pot if there's been a divorce, just because the way, kind of, the technicality of how it all works. So, it would normally not be able to move it into the same pension as your other, but you can move it to the same provider but it probably will notionally be held in a- in a separate type account.

Sarah Pennells: Okay, great. Great stuff. And I say, I know that you know a lot about pensions and divorce, and maybe that's a subject for another-, for another, another webinar another day but anyway. Let's go to another question which is from Laura, and she wants to know what year did automatic enrolment into pensions begin. So, I'll kick-off with this one. So, it's coming up to it's tenth anniversary because it actually started being phased in from October 2012, but that was, like, the biggest employers who first started automatically enrolling their employees and then it moved over a period of years through to the smallest employers and, you know, and new employers. So, it's been with us for a while but I guess, Clare, it's really in the last, sort of, six years or so that it's, kind of, got more momentum because we've had, you know, we've, we've-, well, we've had millions of people automatically enrolled.

Clare Moffat: Definitely and we can see that auto-enrolment has been a big success. We've got more people paying into pensions than ever and that's really great news because, you know, we all have a retirement income need and when we retire we need to be able to have some money so that we can enjoy our retirement and, you know, in our last session we kind of spoke about that idea of thinking what you would like to have in your retirement and making sure that you're saving enough into pensions, so auto-enrolment has really helped with that. And it will be interesting to see what happens over the next few years. I think there will probably be some changes to auto-enrolment. It might start when people are younger, just now that it, it, kind of, is 22 so perhaps we'll see it at 18. So, I think we will see some changes but I think we can all agree that it has been really great.

Sarah Pennells: Yep. We were talking about the faff factor earlier on in terms of having lots of different pensions around but, you know, there was a bit of a faff factor before, certainly for some people of, of signing up for a pension in the first place and, as you say, automatic enrolment has sort of taken that away. You don't actually have to do anything active, although obviously you can leave if you want to. But you are put into your workplace pension scheme as long as you, kind of, meet the qualifying criteria and, as you say, that sort of changed the saving habits of, of millions of people. So, okay, I think we've got time for just a couple more questions or, or, or one or two. We'll see how we go with the answers, Clare. No pressure. So, again, we've got another one which is about NHS, so we may have covered this but I think it's always good to reiterate. So, there's a question from Wayne saying he has three old pensions, he now works for the NHS and has a current NHS pension, can he transfer it to the NHS pension?

Clare Moffat: So, the answer is probably no because it is a public-sector pension, it's really unlikely, and especially because they're older pensions that I mentioned that sometime you can move other public sector pensions, it's-, there's kind of a light limited time frame. It's something called 'the transfer club', so if it is, kind of, public-sector pensions and you're within a certain time then it's worth asking, phoning up the NHS pension, or if you're in Scotland the SPPA who'd be the people that would send you out the literature. But I think if there are three older pensions and they weren't public-sector pensions, then the answer is probably no for that one.

Sarah Pennells: Okay. We'll sneak in one last question as we're-, as we're coming up to the end of the-, of our time. So, it's from Maria who says, 'I started to work at a company in January, I previously worked for nine years until 2016. How do I check the amount paid in so I know how much I can transfer?'

Clare Moffat: So, you should get an annual statement every year which will say how much money you have in a pension, so even when you're no longer actively a member of that pension scheme every year you'll have to get information out. You might be able to have an app that shows you how much so you can just go in and look at how much you've got in that pension but if it's an older pension that you've, you know, you worked in for a while you might need to get in touch with the pension provider. If you can find any literature that's got the name of the pension provider and you know the name of the employer then you can give them a phone, ask how much you've got and then you can ask about transferring as well.

Sarah Pennells: Great stuff. Well, thank you very much. That is all we have time for in today's webinar. Thanks so much for all your questions and for taking part in the polls. It's really appreciated. Thanks Clare very much for answering all the questions. We have recorded the webinar and that will be available online and we'll be sharing the link with you very soon. Do let us know about other topics that you'd like us, like us to cover in future webinars because we're keen to make sure that the webinars cover topics you're interested in but for now thanks very much for joining us today.

Hear our pensions experts Sarah Pennells and Clare Moffat discuss how much you should be saving now for the lifestyle you might want in retirement. This session was recorded on 2 March 2022.

Clare Moffat: Hi everyone, I’m Clare Moffat, and my job at Royal London is to help explain how pensions work. Welcome to our webinar today.

If I say the word ‘retirement’ to you, what comes to mind? Maybe it’s the luxury of not having to work to pay your bills and being able to spend time doing what you want to do. Or maybe it’s something that feels a long way away, that ‘old’ people do and, frankly, it doesn’t feel very relevant to you.

Well, the good news – I hope – is that because we’re living longer than our parents and grandparents, we could spend 20 years or longer in retirement. But of course, the big question is, how do we pay for it?

You might have the dream or hope of retiring at a certain age, or of spending your retirement years seeing the world. But have you ever taken a step back to look at what you have to do in order to achieve that dream?

Now while the majority of people will have a pension they pay into on a monthly basis, have you ever actually looked into how much you should be saving if you wanted to retire early or to afford a certain lifestyle when you do retire?

Now today I’m delighted to be joined by our consumer finance specialist, Sarah Pennells, to discuss just that. Now I’ve got quite a few questions that I am going to ask Sarah to get the ball rolling, but then we’ve got some time at the end to answer your questions so please type these into the Q and A box at the side. Now we can’t answer any specific Royal London queries in this webinar, but we can deal with general pension questions you have.

But now it’s time to meet Sarah. Hi Sarah!

Sarah Pennells: Hello!

Clare: Welcome – so could you start by telling us a bit about your role at Royal London?

Sarah: Yes, so I’m the consumer finance specialist at Royal London and what that means is that I look at the kind of financial issues that affect people day to day. So at the moment I’m looking a lot at the cost of living rises, so the huge hike in energy bills due to come in April, inflation, interest rates, the rise in National Insurance and so on. But I could also be looking at things like the impact of climate change and how that might affect our lifestyle in retirement if we end up having really hot summers or our homes are at increased risk of flooding and looking at what we could possibly do about that now. So that’s a mixture of talking to customers through webinars like this, through our customer newsletter, through content on our website but also doing media interviews so talking on TV, radio and the press.

Clare: Thanks Sarah. So today we’re talking about retirement. It feels like a bit of a big topic. So where do we start with it?

Sarah: It is one of those things I think can seem quite daunting because as you say, it is a really big topic. And I think that’s one of the reasons why people don’t maybe take that first step. And I think the other issue is that retirement can seem so far away it can seem like something that you don’t need to start thinking about now.

But there are a couple of things – firstly I would really start to think about the lifestyle you want in retirement. So, really start to imagine how you’re going to live your life in retirement. What are you going to be doing and how are you going to pay for it? So that you’re starting to kind of picture that life. Now I’m a real fan of writing things down and thinking, okay, how do I want to spend my time, what will I spend my days and weeks doing? And then starting to work out what you think those things might cost. And I think it makes it a bit easier to - well it makes it easier for me anyway! It makes it easier for some people to start thinking about retirement like that rather than for example starting with the numbers. Which, you know, for some people can be a bit dry, a bit of a turn off.

Clare: Okay but what about those people who do love numbers, should they start somewhere else?

Sarah: That’s a really good point. So there are some people for who numbers really do it for them, and in which case I think it’s a question of starting with what you know you’re going to get for retirement if you don’t have any other kind o pension. So you know for us, the foundation of our retirement income is going to be the state pension. So therefore it’s looking at what you’re going to get from your state pension.

So for somebody who’s retiring today who’s entitled to the maximum amount so they’ve got the full national insurance record, the amount of money that they would get by way of the state pension is £9,339 a year. Now that’s an amount that you’ll get per person. Not that works out at around £778 a month.

Clare: Thanks Sarah. So at this point id like us to do a poll. Now that’s beside the Q and A tab. No one will know how you’ve voted by please do tell us what you think. so the first question is at what age would you like to retire? And there’s some options that you’ll see there. So please think about kind of that age grouping that you would like to have a look at, and we can see some of the numbers starting to come in. that’s moving about a bit Sarah.

Sarah: Yeah it is, it’s really interesting actually seeing how people are voting and the kind of ages that people want to retire at. So I think we’ll just keep it moving for a minute or two because people are still carrying on voting. A minute feels like a long time! Maybe not a minute or two!

Clare: If you vote you’ll see how other people respond as well so that’s interesting.

Sarah: Okay, it seems to have settled down so shall we have a quick, do you want to have a quick run though the numbers?

Clare: Yeah so at the top we’ve got 63-65. Oh no! that’s just changed on my screen, 59 to 63. So we’ve got some people who have just voted who want to retire when they’re younger. Then 63 to 65, followed by 55 to 58, 66 to 68 and there’s not many people, only 5% so far, who would want to retire at 69 plus. So, Sarah, why have we asked this question?

Sarah: Well the reason I was keen to get a poll of what people thought is to link it to the State Pension age. So the last time I looked at this only 12% of people said they wanted to retire between 66 and 68 and the most popular answer was 59 to 62 and I think it was 63 to 65, those were about 29/30% each. But you don’t get your State Pension until you’re 66.

So for people retiring at the moment the earliest they can claim their State Pension is 66. And that State Pension age is due to rise, so it’s going up to 67 by 2028 and it’s due to go up to 68 in a few years after that. So unless you’re happy to wait until you get your State Pension I think that’s also going to skew how you then think about how much money you need in your retirement and therefore what you need to save each month.

Clare: And that’s really important. But Sarah, should people be focussing on the age they want to retire or the type of lifestyle they'd like to live?

Sarah: Well I think both really. I guess lifestyle is possibly more important in a way, in that the kind of lifestyle that you want at retirement is going to probably have a bigger impact on how much you need to save every month. So you know, if you’re the kind of person who’s thinking, you know when you’re picturing your retirement, you’re thinking I want to take up new hobbies. I want to travel abroad. I want to eat out a lot. I want to be able to do those things. I maybe want to have a car or what to do up my home.

Well, your retirement in terms of its cost is going to look very different from somebody else who thinks actually I’m quite happy with a fairly modest income in retirement. I don’t need or want to do those things. I’m not interested in eating out. I don’t want to run a car, that kind of thing. So that’s why I think thinking about your lifestyle is so important.

Now obviously for most people a big cost at the moment is going to be where we live. Whether you’re paying your rent or mortgage. Similarly in retirement it’s really important to think about where you’re going to live. And If you have a mortgage now, are you going to be paying that mortgage when you retire? And obviously if you’re renting are you going to be renting the same, similar kind of property to the one you live in at the moment or maybe somewhere that’s a bit cheaper.

 I mentioned the cost of living right at the start and household bills. They’re going to need to be paid as well so you need to factor in things like that. So I do think it is really important.

Now I mentioned about sort of picturing your lifestyle in retirement and why I think that’s a really good starting point. And one of the things I also meant to mention is that instead of thinking about retirement as this concept of something you drift in to when you end your working life, one way to flip it which really worked for me when I started thinking about my retirement quite a few years ago, was thinking about it being the age that you no longer have to work, to pay your bills.

Now I love my job, and I’m not just sating that because some of my colleagues are listening, but I don’t really think I want to retire in a few years’ time. I want to carry on working. But something that does get me quite excited in terms of thinking about my lifestyle at retirement is thinking about the age that I can stop, I can afford to stop work, I can still pay my bills without having to work.

And so that leads me onto the second part and the part we were just talking about as a result of that poll. When do you want to retire? It doesn’t have to be the same as giving up work. But when do you want to have that freedom to stop work, if that’s what you want to do? And does that tie up with when you’re going to get the State Pension? Which is going to be 66 for people retiring now, could be 67, 68, possibly even later for people who are younger. So that’s how I’d think about it. And that’s why I think both lifestyle and when you want to retire are really important.

Clare: That’s great Sarah, thank you. Now time for another poll. So if you were to think about your life in retirement, which of these is closest to how you imagine it? Now obviously everyone will have very different ideas about their life in retirement but try and pick and answer that’s closest to what a good retirement looks like for you.

There’s three options there. Again if you put your answer in and we’ll have a look at what most people are saying. It’s moving about a bit.

Sarah: I think these results are really interesting at this early stage it’ll be good to see what they settle down to., but yeah it’s quite good to see what people are going for as their top answer.

Clare: Yeah I think the top answer is my top answer as well!

Sarah: Okay what do you reckon it’s settling down, should we share the top answer?

Clare: I think that’s settled down now. So, top answer is ‘holiday abroad three times a year, eating out once a week’ followed by ‘one holiday abroad a year and eating out once a month’ and third, ‘holiday in the UK eat out once in a while’.

So I think possibly we could have predicted that result Sarah?

Sarah: Yeah and I can see why people have voted for that and I voted for the top one as well! Once of my reasons why I wanted to ask this poll was not to be nosy about the kind of lifestyle people want in retirement, but to really try and link it back again to how much that might cost you.

So there’s a really useful website which is called RetirementLivingStandards.org.uk and we’ve put the details in the link below. And that website has information about sort of the kind of retirement you might want, and it puts a figure on it. And the research has been done by independent researchers from Loughborough University and they’ve come up with three different categories of how much people might need or want to live on in retirement depending on the kind of lifestyle they’d like.

So the least popular option form our poll was one where it’s minimum standards of living in retirement. And for that the researchers reckon that you’ll need £10,900 a year. And for that you’ll be able to do things like eat out once in a while. You’ll be able to have a holiday in the UK, spend about £40 a week on food shopping, about £40 a month on clothes and shoes. But you wouldn’t, for example, be able to afford to run a car.

Now at the other end of the spectrum, at the other extreme, the researchers have looked at what they call a comfortable lifestyle. And in that case you would have to have about £33,600 if you wanted to have a comfortable lifestyle in retirement. And these figures are both for somebody who, a single person, someone living on their own.

Now for this lifestyle as with the poll, was sort of first option that was not surprisingly very popular, you would be able to eat out in a decent restaurant one a week, have takeaways, go on these holidays abroad. You’d also be able to do up your home. Have a new kitchen of bathroom every 10 or 15 years or so. And you’d be able to have a car as well.

So I would really sort of recommend spending a bit of time on this Retirement Living Standards website. Play around, have a look at the different costs and see what appeals to you. It’s really helpful because it does break it down in some detail as to how much you might need to live on.

And it’s worth saying as well that there is the in-between version which is people who want to have what the researchers have called a moderate standard of living in retirement. And that means that you can go out a little bit at restaurants, have the odd takeaway here and there, you can spend a bit more on things like food and clothes and things like that. And you can run a car, but you wouldn’t be able to replace it as often as if you had this comfortable lifestyle. And in that case the figure that you need is £20,800 a year for a single person.

Now I’ve talked about how much you’ll need as a single person, as someone who lives on their own. If you do live with your partner, your husband or wife then obviously your costs will increase. But you wont need double the amount because generally it’s much cheaper for two people to live together than it is for two people to live in separate households. So in that example where I’ve said for a moderate income you’d need £20,800 a year if you’re someone living on your own, you’d need 30,600 a year if you were a couple.

Now I know I’ve thrown lots of figures around, but I think one thing I would just like to mention as well is that you don’t have to generate that entire income on your own. We talked earlier on about the State Pension and how much you’ll get from that. So depending on when you want to retire you may be able to have the State Pension kicking in from day one when you want to retire, or maybe a few years down the line if you want to retire below State Pension age.

Clare: That’s great Sarah. So this might be a bit of an obvious question, but when should people start saving into their pension?

Sarah: Ah! It’s a really good question. And you know I work for a pension company so you might expect me to say, ‘pile this money into your pension’. But really what I would say is do think about your pension and your retirement income when you can. The reason is that your pension money is invested. It’s not just sitting in a bank account. And it’s the money that you pay into your pension in the early years that kind of does most of the hard work the really heavy lifting. And the reason is that the money you invest in the early years when it starts getting a return in later years when you’re still making your contributions, the early contributions have generated their own return and then you start to get growth on those returns as well. It’s called compounding and it can be quite powerful.

And I think it’s just one of those things that it can feel if you’re young, in your 20s and so on, you can just think oh retirement is so far away. And especially I’ve just talked about when people are going to get to State Pension age. But the reason it is really important to try and think about starting your pension earlier rather than later if you can, is because of this heavy lifting that the early contributions do.

So I’ll just illustrate this with an example. I was talking earlier on about this sort of moderate standard of living, and comfortable standard of living from the Retirement Living Standards website.

So if you were happy to live on the minimum income which is £10,900 a year and you were to start saving into your pension from the age of 22 then you’d need to contribution £45 a month. Now if you left it until you were 40 that figure would rise to £90 a month.

Now if you prefer to live on that sort of moderate standard of living in retirement that middle one, so in which case you’d need to generate the income of £20,800 a year. Well in that case if you started saving when you were 22, the figure you would have to save would be £340 a month. But again it would almost double, it would be about £660 if you waited until you were 40.

Now again it is worth saying around those figures that I’ve quoted if you’re in a workplace pension whether it’s £45 a month you pay or whatever it is, £340, that’s not just down to your own contributions. That figure includes any money that you’re getting from your employer by way of contributions and the government top up that you’ll get through tax relief.

We have made some assumptions around these figures. So we’ve made some assumptions about inflation, we have assumed that you’re entitled to the full state pension at age 66. We’ve made some assumptions about the returns and about charges. So these figures aren’t set in stone, but they are just to give you a guide of the difference between starting to save for your retirement at age 22 and then not being able to or leaving it until you’re age 40.

Again it is worth saying again anyone who’s employed, or a worker, as opposed to being self-employed, as long as they’re aged 22 or over and earning more that £10,000 a year they will be automatically put into their employer’s workplace pension scheme. Now you can leave it if you want to, but in order to join it you don’t have to fill in reams of paperwork that work is already done for you.

Clare: Okay so, you’ve made the decision to start saving into a pension or not to leave the scheme if you have been put into your workplace pension. But how much should you be paying in?

Sarah: Yeah now that’s a really good question. It’s one of those questions that we get asked a lot. So again it’s really important to think about how much you want to retire on and that’s why thinking about the retirement lifestyle you want is so incredibly important. So the answer really will sort of depend, different people have different answers. But for example at the moment if you are enrolled into your employers workplace pension scheme, you will be saving 8% - that’s the kind of minimum amount that will go into a workplace pension. And that’s roughly 8% of your salary and that will be made up of your own contributions, and your employers contributions and this government tax top up. So the employer will pay in 3%, you will pay in 4% and then you’ll get an extra 1% which is this tax top up from the government.

And so you think ‘great well that’s money in going in, and I’m in my pension scheme, happy days’. But I think it is really important to think about whether that’s going to be enough for the retirement that you’d like. And especially as we’ve heard from people who have been voting that lots of us want to have a nice lifestyle in retirement and you completely understand why. So I think it’s really important to think about there may be a gap between what you’re paying and what you want, what you actually need, in terms of generating that income at retirement.

So there are some useful websites that can help you work this out, there are some pension calculators. We’ve got one on our on website. There’s one also on a website called MoneyHelper which is an impartial government-backed website. And what you can do with these pension calculators is you can put in information about how much you’re paying into your pension at the moment, how much your employer is paying in, and tax relief, and then any other pensions that you may have built up over the years you can put in those details. And then it’ll start to tell you what kind of income you might generate in retirement. Once you see that figure I think you can really start to work out is there a gap between what I want and what I’ve got?

I think as well, it’s really important to say that you know, I’m talking about lots of figures and picturing your retirement and working out how much is going into your pension, and how much you might get. And people might be thinking, I need to wrap a cold towel around my head and have a lie down! And that’s where I think, why a financial adviser can be so helpful.

At Royal London, we’re champions of financial advice. We think it’s really important for people to get financial advice. And one of the reasons is that we’ve done some research over the years that shows that financial advice doesn’t just make people better off financially it also helps them emotionally. So people who take regular financial advice are less likely to be anxious about their finances. They’re more likely to feel comfortable about their own financial future.

And what a financial adviser can do in this situation is they can really look at, help you to unpick that retirement lifestyle that you’d like and start to put some figures against it and then work backwards and say; okay you want this lifestyle in retirement, this is the kind of income you’d need to have including any State Pension for example, this is the income you’d need to have when you retire, let’s work backwards - this is the age you are now and therefore this is the amount that you should be setting aside every month.

So as I said I think having financial advice around something like this is really, really useful. But we know not everybody has a financial adviser, many people don’t so those calculators, and the MoneyHelper website that I mentioned, they can be a really useful as a really good starting point for you to do your own research. And even if you do have a financial adviser, I know lots of people like to do their own research before they talk to their adviser, so they feel they’ve got their head in the right space. So that’s why those websites can be a really good starting point. So the address of the MoneyHelper website, as I said it’s impartial and government-backed, is moneyhelper.org.uk.

Clare: That’s great Sarah, and I know that we’ve spoken in the past and said that actually we speak to a lot of people about their finances and pension and retirement, and people who’ve retired, and actually we very rarely we meet people who say ‘I’ve got so much money, I’m retired now, I don’t know what to do with it’ so these are top tips. Thanks Sarah.

Are there any rules of thumb that people can use to work out how much they should save?

Sarah: Yeah that’s another really good question.  I mean there are a few rules of thumb that I’ve seen over the years that are flying around but one that I think can be quite useful - take the age that you start saving into your pension and then that’s the basis of how much you should be putting into your pension every month as a percentage of your salary. So if we take somebody who can be automatically enrolled into their workplace pension, they’ll be 22 when that happens, so if you start saving into your pension when you’re 22, if you halve that age you get 11 then 11% is the amount of your salary or income that should be going into your pension every month. If you wait until you’re 30, if you can’t or you don’t think about saving into your pension til you’re 30, halve that that’s then 15%. If it’s 40 before you think about or are able to save for your pension I think that’s when it starts getting a bit ‘eek!’. It’s actually 20% of your salary then that needs to go into your pension.

But again while I’m talking about these figures as you know 11%, 15% or 20% that’s the total amount. So again if you’re employed or you’re a worker, you’ll be in your employer’s workplace pension scheme. So that includes not only your pension contributions but your employer’s and that top up from the government by way of tax relief.

Clare: So that’s definitely a great starting point to think about. Now, Sarah what would you say to people who didn't start saving in their early twenties though, especially if they can't afford to be saving more because of the current climate? I mean, is there anything else they could be doing to reach their goals?

Sarah: Yeah again I think it’s a really good question and for a lot of people there are always other priorities, there are always things that you think, oh actually I could be spending my money on this, or sometimes, I should be spending my money on this.

And you know, we have got a cost-of-living crisis. And I’m aware from talking to people of some of the really tough choices that people are having to make. So the first thing I’d say is that if you get to the stage in your life when suddenly retirement is feeling rather more real and you realise that you don’t have the kind of pension pot saved up that’s going to give you the kind of retirement you would really like, don’t panic because all is not lost.

There’s a couple of things that you may be able to do. Now some people may be able to do more of them than others, but I’ll just run through them anyway.

First of all, think about whether you’re in a position to put more money into your pension, that’s obvious in a way. But you may be able to put a lump sum in or maybe even just to edge up your monthly contributions. Even paying in an extra 1% of your salary every year could make a difference to the amount that you have at retirement. And if it’s not something you can do at the moment, maybe you are worrying about the cost of living, is it something you can do in 6 months? Is it something you can set a reminder to do in a year or at some point in the future? Even if it’s something you can’t do now, don’t just kind of ignore it, do try and come back to it if you can.

The other thing to look at is you may have other savings or investments. So I think we often talk about retirement and pensions interchangeably and although pensions are a really tax-efficient way to save for your retirement and if you’re in a workplace pension you have that advantage of getting the contributions from your employer as well. But people may have savings or ISAs or other things and it doesn’t have to be that your retirement income is only generated by your pension.

The other thing is can you retire later than you’d planned? Again we heard from the poll, we saw in the poll, the ages at which people wanted to retire but can you revisit that and either carry on working full time or maybe even part time? Now in days gone by you had to retire at the age of 65, but the default retirement age was abolished over a decade ago so now you do have much more choice about when you retire so that’s another thing to look at.

And I think lastly just think about where you’re going to live. So if you own your home, do you want to live in the same kind of property? Could you maybe free up some cash by selling and downsizing, buying something that’s a bit cheaper and having a lump sum of money? Maybe you think well actually I don’t want to move, I love where I live, I’m really happy here. Well in which case perhaps you could consider releasing some equity through equity release which is where you basically you take out a mortgage that you don’t pay back until you either die or move into long term care.

Now some of these decisions are going to be really big decisions, so if you’re thinking about selling up a property, talk about it with your family. If you’re thinking about equity release talk about it with your family, but it’s also really important to take legal and financial advice. I think the point is that even if you think actually, this is not where I wanted to be, I’m at whatever age I am and retirement suddenly feels quite real, there may be steps that you can take.

Clare: Okay, thanks Sarah. And how much should people be relying on their State Pension?

Sarah: Yeah I think this is such a good question and we talked earlier on about how much the State Pension was, is. So for somebody retiring at the moment it’s this figure of £9,339 a year. Now that’s assuming that you’re entitled to the full State Pension. So in that case you’ve either paid National Insurance for 35 years or you’ve been credited with National Insurance for part of that time, perhaps because you were out of work, claiming benefits, you were ill or you were not working, you were looking after your children and claiming child benefit.

Now that figure works out at around £179 a week. And again, if you want to break it down into a daily figure that comes in at just under £26 a day. And again if you think about that, and I’ve talked about this before, about this and State Pension figures to other people, that sort of £26 a day, and I think there’s the assumption that’s your spending money. That’s your money for your coffee and your treats. But it’s not. That £179 a week, £26 a day, that’s the money that you have to live on. That’s what you have to pay your bills, your food. If you want to go out it’s got to pay for everything.

And again some people might think, well actually I am quite happy with a fairly modest standard of living in retirement. But if that’s not you, if you don’t want to just retire on the State Pension then you really do have to think about paying into a pension, how else are you going to fund your retirement? And as I said much earlier on it’s not just about how much you get it’s also about when you get it. Are you happy to wait until you’re 66 or possibly even later to get that income in retirement?

Clare: Okay so let’s just do one last poll to have a think about that and to ask, would you be happy living on the State Pension alone, just State Pension, when you retire? So if you fill in the poll question and we’ll see what most people think.

I think the responses from earlier showed that people wanted to retire before State Pension age so there’s a bit of a gap there, but would most people think that that amount of money is going to be enough in retirement? I think it’s fairly conclusive Sarah so far. The numbers are still going up, but the percentage isn’t really changing. So it looks like 98% of people are saying actually they would need more money than State Pension in their retirement.

So Sarah what would you suggest to people that, what can they do to make sure they’ve got those pension savings, so they have that choice of when to retire and how to enjoy their retirement and that lifestyle that they want in retirement?

Sarah: Yeah so first of all I mentioned earlier on about workplace pensions, and you know these days most people will be in a workplace pension, so as I mentioned if you’re age 22 or over and if you earn at least £10,000 a year. Now it is important to say that if you have more that one job then that £10,000 threshold applies to each of your jobs.

So if you are in a workplace pension then you know it’s really important to stay in that because it’s a really good foundation for your retirement. And as I mentioned the benefit of a workplace pension is not only is your money going in, but you get that money from your work, from your employer, as well. I do understand, I’ve been talking about pension and savings, save for your retirement, prioritise your pensions, prioritise your retirement and I really understand that for a lot of people, especially for younger people you might be thinking – I’ve got other things to pay, I really have, I can’t prioritise my pension, and I do get that. I think we all get that, especially at the moment.

But I think it really comes back to this, well two fundamental points. One of them is if you don’t save for your retirement what will you live on? And we just saw from that poll 98% of people said they didn’t think the State Pension was enough for them. So if you don’t have any other pension then you will be living on just the State Pension.

And I think as well, it’s thinking about okay well if I don’t, if I’m not happy just to live on the State Pension and I really need to think about having a pension. I also mentioned earlier on that it’s those earlier contributions that will do the real heavy lifting. Of course people have to make their own decision about what their priorities are but the earlier you start the easier it is in terms of the monthly amount that you need to pay in because of this compounding effect, because of the heavy work that those early contributions will do for you.

Clare: So Sarah, let’s think about someone who has a set amount going into their workplace pension, now can they pay more into their pension if they wanted to?

Sarah: Yeah absolutely. So again I was talking earlier on about this minimum amount of approximately 8% of your salary that will be going into your workplace pension. But you can pay more in, and even a relatively small amount, you know an extra percent or 2%, can make a difference potentially to the mount of money that you’re going to get when you retire.

But you may also get some help from your employer if you do that. Quite a few employers will do what’s called marching contributions. So in that case if you want to pay in some extra, so say at the moment you’re paying in 4% of your salary plus 1% of government top up of tax relief that’s going in. Well if you could afford to pay 5, 6, 7% your employer will match that pound for pound. Now different employers have a different approach. Some of them may match up to a limit of 7% some 8, 9, 10. A few of them even higher. So it is really worth asking your employer – do you do employer matching? If so, what’s the limit? What’s the maximum I can put in with you matching that pound for pound? Now again as I said not all employers will do this but there are a couple of other options to think about.

So if you’re in the kind of job where you get a bonus then you can do something called a bonus sacrifice or a bonus exchange. And the way that works is that instead of getting your bonus paid into your bank account you give up some or all of it. Now that could be a percentage or you could decide to give up a certain amount, up to a certain limit. And in that case the bit that you exchange doesn’t end up in your bank account, instead it is paid directly into your pension by your employer. Now the advantage of that, apart from having more money going into your pension, is that you save tax and National Insurance on the bit that you give up and your employer saves National Insurance as well.

Now if you don’t get a bonus, there’s something called salary sacrifice, or salary exchange, that you can also do in a similar way. So here, you and your employer agree that you will exchange a percentage of your salary and again that money will go directly into your pension. So again it’ll save you some tax and National Insurance and save your employer some National Insurance as well.

Now these are just suggestions, I’m not giving advice, these are just things to think about. So salary exchange in particular it may not be right for everybody. So for example it will affect any salary related benefits that you might get. So we obviously hope that people don’t have to be furloughed in the future, but your furlough pay is based on your salary so if you’ve exchanged some of it, it will affect that. And again there are certain benefits that are maybe related to the amount of salary you get. So it’s just something to think about, it’s not necessarily right for everybody. But I would just say one thing which is, years and years ago I used to work for the BBC, a very very long time ago. Before you were automatically put into your workplace pension. The days when you had to sign up and go through the paperwork and join. And I did join the pension scheme quite early on. And I was paying, you know whatever it was, into my pension. And to be honest I didn’t really give it any thought as to whether it was enough or not. I was just kind of, I’m in the pension – job done. And then I started working on a personal finance programme on radio after I’d been at the BBC for a few months. And I guess if you can imagine, pensions were a hot topic. Previously I hadn’t really been somebody who found finance, pensions, that fascinating, it wasn’t something I spent my childhood and teenage years talking about. But I did find it interesting when I started working on this programme. And a couple of people were talking about their pensions and how much they were paying in. And they mentioned that they were paying in more than the standard amount, and to be honest it wasn’t really something I was aware you could do, and it certainly hadn’t really crossed my mind for me. But it was something I thought, I really ought to get my act together, because the way they were talking about it, it seemed to make a lot of sense. And it was something I did. And in some ways you can say, it is something I’m very glad I did. But it wasn’t almost like it was a conscious decision where I got out my spreadsheet and started to look at how much I’d need. It was really based on this conversation I had with a couple of my colleagues when they were like, well actually this is why it could be a good thing to do. So I think sometimes it’s thinking about your pension, there are unusual things that can trigger that thought process and conversation. But it’s definitely worth exploring employer matching, if you get a bonus whether bonus exchange is right for you, and as I mentioned salary exchange or sacrifice as well.

Clare: That’s great Sarah. Now just to finish off, what are the three key things that everyone should think about and take away from today?

Sarah: I think the first thing is this mindset shift, and I mentioned this idea of being or having your own financial independence day, and it’s something that really made a difference to me as to how I thought about my own retirement. So don’t think about retirement as being something that – in inverted commas – old people do, and you sort of shuffle off to the end of your working life. Start to think about, when do I want to not have to work to pay my bills? I can work if I want to, but when do I want to have my own financial independence day?

And again if you’re looking at money that’s coming into your salary and money that’s going out to your pension it can feel like you’re depriving yourself. You’re thinking, that’s money I could spend today. But again this is something that I’ve found really helpful when I’m thinking about either saving in cash savings account or my pension is instead of thinking about the money that I therefore wouldn’t have to spend today as being given up, it’s about buying myself options and choice further down the road. So whether that’s about having the ability to go on holiday without putting it on a credit card. Or being able to retire without having to live on the State Pension which our poll told us that 98% of people don’t want to do.

The second thing is to really think about the retirement lifestyle you’d like. So not thinking about it in vague terms, just really start to put some numbers against it. So I mentioned that Retirement Living Standards website. I talked about how financial advisers can help. And there’s calculators that we’ve got, and also there’s one on the MoneyHelper website.

And then lastly, if you’re in a workplace pension, don’t opt out of it if you can afford not to. Think about how much is going in and maybe look at ways that you could increase the amount that you’re saving, if it’s something that you can afford to do.

Clare: Okay, brilliant, so thanks for those three top tips and I totally agree that mindset shift is absolutely crucial. Now we’ve had questions coming in while we’ve been talking so let’s move on to them and see the type of things that we have been getting.

So, there are quite a few questions. Ah now! This is one that often I’ve come across and I know you’ve come across. So Amy says - I don’t really understand how tax relief works, can you explain it some more please?

Sarah: Yeah, Amy it’s a really good question, I’ll give it my best shot! I think one of the problems with tax relief is I don’t think the name really explains what it does. But the way to think about it is as a government top up in terms of the money that’s going into your pension.

So I think the easiest way to explain it is with an example. So assuming that you want to say pay £100 a month into your pension. If you’re a basic rate taxpayer you will have already been paying tax on income that you receive. But when you put that money into your pension the government effectively kind of gives you some tax back as a top up. So back to the £100 a month example, if you’re a basic rate taxpayer, and you want to pay in £100 a month, it will actually only cost you £80 a month because the government will pay in the other £20 in tax relief. Now if you’re a higher or an additional rate taxpayer then you can reclaim higher rates of tax, you can normally do that through your self-assessment form if you fill it in. It’s one of those things that you know, pensions does sometimes have some not very user-friendly jargon and I think tax relief is one of those things that doesn’t really explain what it does. But once you understand it, I think it’s really useful to think, every time I’m paying into my pension the government is paying as well. And it’s not every day that you get money from the government, so I think it’s definitely a good one to understand and think about!

Clare: Definitely and to just add to that as well that depending on the type of scheme you’re in you might have to, if you’re a higher rate or additional rate taxpayer, you might have to claim it back. But if you’re in a salary exchange scheme then that will automatically happen so it’s worth checking that if you are a higher rate or additional rate taxpayer.

Now the top question just now is – I have a number of pensions from different previous employers, should I combine them? And again this is a question we get asked quite a lot isn’t it Sarah?

Sarah: Yeah and I mean it’s one of those questions, it’s a really really good question and you’re going to hate me for saying this but there isn’t really a straightforward answer!

There are pros and cons and it’s the kind of thing that it’s a really good idea to get financial advice on, but ill just give you a couple of things to think about.

So reasons why it might be a good idea to combine your pensions. If you’re somebody who finds it hard to keep track of lots of different pots then it can be easier to see them all in one go. Having said that there is something coming down the track called the Pensions Dashboard which means that you’ll be able to see on one sort of, as it sounds, dashboard, all your pensions at the same time. So that’s maybe just worth being aware of.

Reasons why it might not be a good idea. In terms of where you’re moving your money to it’s always worth just looking at what the charges are, whether you’re giving up any existing benefits from your pensions. So some very old-style pensions have some specific benefits which can be quite valuable and if you were to give those up by transferring elsewhere then you could be worse off.

And it is worth saying, we’re talking about combining pension posts like pensions are all the same but there are two main categories of pension. One is what’s called a defined contribution pension which is what most people will be saving into these days and it’s where you pay in money, your employer does, you get this government tax top up and then you get a pot of money at the end that you can take money our of or convert into a guaranteed income. But a while ago a lot of people were in what was called a defined benefit or final salary scheme and there the amount the you get at retirement is linked directly to your salary rather than the pot that you have that you’ve been growing over the years.

So in this case, generally, thinking of combining a final salary pension with another one it’s generally a bad idea. Again, there can be some exceptions, but the starting point is often this is not a good idea and if it’s something you’re thinking about, unless you’ve got a very small pensions, you’ll normally have to take financial advice as well.

Again there is information about this on our website, there’s also information about it on the MoneyHelper website. But if you are thinking of doing it it’s a really good idea to take some financial advice first.

Clare: Okay so, next question is should I pay off my mortgage before increasing pension contributions? Now that’s another interesting one isn’t and it’s probably another one that there’s not quite a right or wrong answer, but Sarah what would you recommend – well we can’t really recommend – what would you say to that question?

Sarah: It’s a really good question again and I don’t want to frustrate people by saying there’s no easy answer, but first of all I’m not a financial adviser so I can’t give you advice, I can just give you some suggestions and things to think about.

So first of all I think it depends on how much your mortgage might be and whether it’s the kind of thing that might stress you at the moment. So we don’t know what’s going to happen to interest rates. Some people are on a variable rate, so for example if you’re on a variable interest rate and you’re worried about interest rates rising, you might think actually I’d rather get my mortgage down a bit if I possibly can.

Sometimes because of the way fixed rates are priced, you can get a much better fixed rate if you have a little bit more equity so you might think I’ll pay it down a little bit and I can qualify for a better fixed rate. Again that might be something to think about. On the other hand, I was talking about why how a bit extra into your pension potentially could make a big difference especially in the early years. So my thoughts would be it doesn’t necessarily have to be either/or. I think it depends on the size of your mortgage, what your plans might be, how much the mortgage is compared to the value of your property, whether you’re on a variable rate deal, how much headroom you’ve got in your budget if you are on a variable rate deal. Would you not be able to sleep at night if mortgage rates go up? But also think about the tax efficiency of pensions and the fact that if you are paying extra into your pension and you’re working, you’re employed, you could potentially get some more money from your employer if they do this matching.

The last thing I’ll just say and again this is not advice, this is just what I did. I did a bit of both, I did pay a bit extra off on my mortgage when I could, but I also like I mentioned earlier on, increased my pension contribution. Because although it was important to think about my mortgage it’s actually my pension I’m going to be living on when I retire, not my house.

Clare: Yeah, okay then, there’s a couple of questions that are sort of dealing with death. So what happens to my pension when I die? And there’s also another question about passing on pensions to children. Sarah, shall I pick up this question because this is certainly a topic which comes up quite a lot?

Now again Sarah mentioned this issue of the difference between the two types of pensions, so the pension when you save up and you have a fund on retirement that your employer’s contributed to, or final salary or defined benefit type pensions. Now the death benefits are quite different.

So what I would say is if you’re thinking, if you have a personal pension or a workplace scheme where you are contributing and you’re expecting this fund on retirement and you kind of choose what to do, then normally what happens is the death benefits if you died would go to the people that you would want them to go to.

Now what’s really important, and often people forget about this, is that there are forms to be filled in, and on that form you put down who you would like to receive the death benefits. Now obviously the older you are, the bigger the fund can be, and actually if you die when you’re under 75, your beneficiaries will get that money without paying any income tax. So it’s really important to fill in that form, to say who you would like to receive the benefits.

Now again it’s a bit of a tricky question because different schemes operate in different ways and you can ask exactly how it works, but that fund of money isn’t going to disappear when it’s sitting in your pension. In most scenarios it is going to end up with the people that you would want to receive it. But make sure you fill in these forms. So if you haven’t filled one in and you’re in a workplace scheme then ask your employer for one because it’s really important.

I know that certainly I would want to know that my family were going to receive the benefits so I’ve asked that my husband and my three children would receive the death benefits when I die because it’s important to me that they would all have a share.

I don’t know if there’s anything else that you’d like to add about death benefits, Sarah?

Sarah: No I think you answered that very well and because I’ve got a bit of a sore throat I was using the opportunity to have a glass of water so thank you for picking up that question!

Clare: So another question, should I be paying more into my work pension or running my own?

Sarah: Again, we’re getting some great questions so thanks so much to people who are submitting questions, and also who are voting the questions up, so I’ve seen some that we’re getting in, the popular questions. It’s really appreciated.

As I said really good question. So I think in terms of whether to pay more into your workplace pension or to have your own, I mentioned the extra benefits that you may get from your employer. So if they do this matching of contributions. So again this is not advice, but my starting point would be to start with my employer, find out whether they will match contributions up to a certain limit if I pay extra. So every pound you pay you’ll get a pound from your employer.

Also think about whether you can use this bonus exchange or salary exchange because that’s quite a tax efficient way of paying extra money into your pension. There may be reasons why you might want to run your own pension. It’s normally to do with if your workplace, if you want to invest in a certain kind of fund that your workplace pension doesn’t offer. But I would just say one word of, well not quite caution, which is maybe one thing to explore before that. The vast majority of people who are in a workplace pension are in what’s called a default fund. So basically that’s the fund that you’ll be put in to if you don’t actively decide to put your money into a different fund.

Default funds can vary from one workplace pension provider to another, but I think the bigger point is that if you are in that default fund, or even if you’re not, your workplace pension may offer funds that you weren’t aware of or that you haven’t though about switching your money to. So if it’s about thinking, actually I want to handle my own pension because I want to invest my money in a certain way, then maybe look at your workplace pension first just to be sure that they don’t offer that option. Because what you may be able to do is split your money and have some of it going into one fund and some going elsewhere, so that’s definitely something I would think about

Clare: Okay now I’m just flicking through the questions, we’ve only really got a minute left. There’s an interesting one that’s come up with someone who’s a stay-at-home mum, Sarah. And I think it’s important to think about this as well because there are quite a lot of people who don’t. So they’re asking - should they set up a private pension while they’re not working? Sarah, did you want to just pick that one up as the last question?

Sarah: Yeah, again really good question. There’s a couple of things to think about. Firstly, under the rules you’re allowed to pay in up to 100% of your salary or £3,600 a year into a pension, whichever is the largest. Now if you’re not earning at all that means you’re allowed to pay in up to £3,600 a year. Now that figure includes tax relief, so just because you’re not earning doesn’t mean you can’t benefit from this tax relief, this government top up that I mentioned earlier on. So again I just think it is worth thinking about that even if you’re not working and you don’t have earnings, there may be ways that you can save that mean you benefit from that tax relief.

The other thing is it is possible for one person to set up a pension for another. So it’s possible for example for grandparents to take out a pension for a child, or for a husband to take out a pension for a wife or partner or vice versa. So there are ways that it’s possible for you to benefit from having money going into a pension and getting that tax efficiency. You don’t necessarily need a salary or income to do so.

Clare: That’s great Sarah. Well, I think we’re almost at the end of our time today. So thank you so much to Sarah for answering all those questions today. And thank you for watching and submitting such great questions. Now, sorry we didn’t get to all of the questions but hopefully this session has helped you in planning and saving for retirement. We will read all of the questions though and look at the ones we didn’t answer, and we might use them to help shape future webinars.

So thank you again and have a good day!

Sarah: Thank you.