Your pension made simple

Jonny: Hello, I'm Jonny. And this is Rachel.

Rachel: Hi. Good morning everyone.

Jonny: And we are the official Pension awareness campaign and you are joining us all this week and we're going to tell you everything you need to know about pensions. Yes. Oh, yay. We're so excited. Thank you for joining us.

Rachel: And today is Pension Awareness Day.

Jonny: The 15th of September is the official Pension Awareness Day in the calendar. But they already knew that, Rachel. Of course they did.

Rachel: Of course. Of course they did.

Jonny: And I was going to say, we've got 8,000 people registered for the show today, this morning. This one. Now you are one of 8,000 people who have signed up and that is a world record, a Pension Awareness world record.

Rachel: Brilliant. Yeah, absolutely.

Jonny: But we couldn't do this without our first presenters, our first guests from Royal London. We're going to say hello to them now. Sarah and Clare, how are you this morning?

Sarah: Really, really well. Very excited to be here and ridiculously excited about, about the fact there's 8,000 people who has registered for this is fantastic. What a way to kick off the week.

Clare: Brilliant to be here.

Jonny: Brilliant, brilliant. And the first show today. Yeah, you have joined the right show that you signed up for is Your pension made simple. But before we start, we just want to tell you a few things that we've put together to make this show fantastic for you today and this whole event. So we've created a website just for you, where you can go on, which you've probably been on already. But, there's a website called PensionAwarenessDay.com where you'll able to see all the shows we've got this week. So we've got eight shows Rachel going on this week.

Rachel: We have, yeah, that's right.

Jonny: And we've got some fantastic guests, obviously Sarah and Clare here, but we've also got Steve Web, he's coming on. We've got Agon who are talking about combining pension pots. So if you're not, registered to any other shows, make sure you get on that and register.

Also, biggest question we get when we do these shows is, are these shows recorded? Yeah, we do.

They are, they are recorded and you can see them on this site as well.

So if you go to the navigation on bar the side of this website, you'll see a catch up button. If you press that, you'll able to see where the catch up all the videos are.

Rachel: So that's great. So, how long are the video on the site for Jon?

Jonny: They're going to be on all year. So you'll be on all year.

Rachel: You've got time. You've got 12 months, you've got to watch them.

Jonny: So that's great. And also we want to hear from you. So beside us now, there's a q and a tab where you'll see beside us, we want to hear from you. So I see some people are using it already, but if you have any questions, please put them in there. Cause in 30 minutes time, 25 minutes time, me and Rachel are going to put your questions to Sarah and Clare, and they will trans them for you.

And  also what we're going to do this week as well, we've got our fantastic pension challenge. So we want to challenge you to download our checklist with six simple questions to, you know, find out how much is in your pension pot right now. Do you know how much money is in your pension pot right now? Have you created a beneficiary form? Do you know who is your beneficiary? If anything happens to you for your pension? So make sure you download this form. We're going to put the link beside us now in the chat. Make sure you have a look at that.

Let's kick this show off. Sarah, Clare back to you in the studio.

Sarah: Thank you very much indeed, Jonny. So I'm Sarah Pennells and I'm the Consumer Finance Specialist here at Royal London.

Clare: And I'm Clare Moffat. And I'm Royal London's pension and tax expert.

Sarah: And today we are going to cover six of the most asked about topics in relation to pension saving. And Clare, we're going to start at the beginning with what seems like a fairly simple question. What is it?

Clare: That's right. The question is what is a pension? And how does it work? Now we love pensions, don't we?

Sarah: We absolutely love them.

Clare: We really do. Now, the reason we love them is because of what a pension allows you to do. It's, it's a bit like a bank account for when you stop working money. You can spend on whatever you want when you're retired. And actually you don't need to stop working normally to take money out of your pension.

Okay? So that's the simple part. But if you don't understand how your pension works, then you're probably not going to love it. And how they work well is a little bit more complicated. Now, you might have heard people talk about pensions as being tax efficient. But what does that mean? Well, it means that there's a taxes incentive when you pay money into pensions and a tax incentive when you take money out of pensions, one of the main benefits of paying into a pension is that when you pay into it, the government tops it up. And that's because it's called a tax relief. So it's a bit different from an ISA, for example, because when you pay money into an ISA, you've paid tax on that money. Then when you take money out of a pension, you can usually take out 25% tax free. If you take any other money out of your pension, you will pay tax on it a bit like you do with your salary to take money out of your pension.

Currently you have to be at least age 55 or over, and that's increasing to 57 and over from 2028. But let's go back to tax relief because it's a common question we get asked about

Sarah: All the time, All the time.

Clare:  And our research shows that lots of people are confused about their pension's tax benefits. Now that's not really surprising. At Royal London we do a lot of research and we often ask people about their pensions and you know, kind of what they do. Now, two years ago we commissioned some research with 4,000 adults in the UK.

Now we found that over a third of those who had a pension, 36% didn't know that they get tax relief from the government on their pension contributions. So let's have a think about how tax relief works if you pay income tax.

Now, the easiest way to do that is with an example. So let's have a look at the first slide. Now in this example, if you pay £80 into your pension, the government tops that up with £20. So £100 goes into your pension.

If you're a higher or additional rate taxpayer, you get the extra tax relief at the higher rate of tax. So that would bring the total tax relief if you're a higher rate taxpayer to £40. And if you're an additional rate taxpayer to £45, if you're in some types of workplace pension, like a public sector pension scheme or a group personal pension that allows salary exchange, then you don't need to do anything and you'll get the full amount of tax leave automatically.

We can take that slide down now, thank you.

But if you have an individual pension or some other types of workplace pension, you'll get the same 20% tax relief initially, but you'll have to claim the extra 20% or 25% back from hm, revenue and customs. It won't go into your pension, but it will reduce your tax bill.

Now you can either do this on your online tax return or by writing to HMRC, but don't forget to do this. Now in Scotland, the amount you get in tax relief is different. And that's because in Scotland, if you're a higher earner, you pay a higher rate of tax than people in the rest of the UK pay.

Now if you don't know how tax leave from your workplace pension works, then ask your employer.

Sarah: So Clare, what you're saying is if you are an additional rate or a higher rate taxpayer, then you need to check whether you've got to do something to claim that extra tax relief back or you could be losing out?  

Clare: That's right. So don't miss out, it's really important. But the amount of tax relief you can see you can receive isn't unlimited. So there's no limit on how much you can pay into your pension, but the government do restrict how much you can pay in and still receive that benefit of tax relief.

So that sounds a bit complex, doesn't it? So how does that work?

Well, if you're employed, you'll receive a salary, you might have overtime, you might also receive a bonus perhaps. Now, theoretically you can pay all of your salary, all of your bonus, all of your overtime, and all of your savings that you have into your pension.

Sarah: You wouldn't be able to live, you wouldn't be able to buy food, you couldn't pay your bills!

Clare: I mean that, that is true. But the rules in theory allow you to do that. But you will only get tax relief on pension contributions up to 100% of your earnings. Now that's your salary and including any overtime or bonus. So if you earn £30,000 a year, then you can only, receive tax relief on up to £30,000 of pension contributions a year.

Now, as we mentioned, you'd be unlikely to do that because you wouldn't be able to live, you wouldn't be able to pay the bills. But under the rules you still could do that. And for some people they might use this because they maybe have inherited some money and want to pay that into their pension.

But now it's time to move on to number two. So Sarah, what's that?

Sarah: Well, number two is how does your employer pay into your pension? So Clare, you were talking there about tax relief, but if you are employed or you are on a contract and you are aged between 22 and State Pension age and you earn at least £10,000 a year from that job, then you'll be put into your employer's workplace pension without you having to do anything.

And that's thanks to something called automatic enrolment. Now, the rules around automatic enrolment also set out how much has to go into your pension. So as a minimum, the rules say that approximately 8% of your salary has to be paid into your pension every month.

Now some of that money comes from you, some comes from your employer and some comes from the government in the form of tax relief that Clare was just mentioning. So how does that break down? Well, 4% is your contribution. So that comes from your salary, 3% comes from your employer and that's their own money that's not taken from yours. And then 1% comes from the government in the form of tax relief.

Now, it is important to say that these amounts are the minimum that the automatic enrolment rules set employers can pay in more, and indeed some do.

But it is important to stay in your, in your pension, you might be thinking, well this is a lot of money that's coming out of my salary every month and I could really do with that to pay my bills or you know, to, to go out and have a nice time.

But saving into your pension. Many people find when they retire, they don't actually have enough money for the kind of retirement that they want.

And the earlier you start, the easier it is to kind of achieve that sort of pension money that you want in retirement.

And that's through something called compound interest or as Clare and I prefer to talk about it, the magic of time.

So let's assume that someone's aged 22 when they're on a salary of £35,000a year and that sort of 8% of their salary is going into their pension. If we make some assumptions about the pay rises they get and inflation and so on, by the time they reach the age of 67, they could have a massive £270,000 more than someone who was on the same salary, but who started saving into their pension when they were 30 £270,000.

Clare: That is a huge amount of money and that could make all the difference to someone's retirement and it might actually change when somebody retires. But Sarah, what if someone hasn't started saving into a pension when they're 22?

Sarah: Well, all is not lost. I mean, I didn't start saving into my workplace pension when I was 22 when I started work. Frankly, automatic enrolment hadn't been invented. But you know, don't worry if that's your situation, it's not too late to still build up your pension savings.

Now, there are some ways to pay extra into your workplace pension, and Clare will talk about those in a minute. But your employer may offer something called salary sacrifice or as we prefer to call it, it's often called salary exchange.

Now we prefer that description because what you actually do is exchange some of your salary in return for your employer making all the pension contributions into your pension. Now that sounds a bit confusing.

So kind of how does it work? Let's explain it with a slide. We'll look at this example here of Louise. Now she earns £35,000 a year. Now obviously she pays tax and national insurance. She also pays £1,400 a year into her pension. Now her employer pays £1050, so just under £2,500 goes into her pension every year.

Now there's a whole load of figures on this slide. What I really want us to focus on, these are just to give you an indication of the effect of salary exchange but just focus on Louise's position before and after.

So that's her position. Before, if she was to do salary exchange, then her salary would be lower £35,000 a year. She still pays tax in national insurance obviously, but she doesn't make any pension contribution because her employer makes it all on her behalf.

Now we heard, we saw at the beginning her take home pay before salary exchange is £27,320. Now if she does salary exchange, she still has that same take home pay of £27,320. You're thinking, well what's the point of doing salary exchange?

The reason you do it is because of the amount that's going into a pension after salary exchange. There's £3,251 going into a pension rather than that £2,450. So that's quite a big difference.

Now, employers who use salary exchange sometimes pay some or all of their national insurance saving into your pension for you. But even if they don't do it, it is still a saving.

So we can lose that slide now. Thanks very much.

Now there are two ways that you can do salary exchange. One is to do what Louise did, which is to have the same level of take home pay and have more money going into her pension. The other way is to have the same amount going into your pension, as would be the case without salary exchange. And in which case you keep more take home pay. And again, it might be tempting to do that to think, well, I want all the money I can have now.

But two things to think about. Firstly, your salary is taxed. So that difference between having more money going into your pension or having the sort of less money may not be as much in terms of the take home pay you get.

And secondly, as I mentioned earlier, a lot of people don't actually end up with the kind of money they want to have, the lifestyle they'd like in retirement.

Now, it is important to say that salary exchange does mean a change to your contract and that change normally lasts for 12 months and salary exchange is a good idea for many people, but there are some circumstances where it may not work and your employer should explain what those are.

But for example, you can't use salary exchange if it would take your salary below the living wage.

Now if you get a bonus through work, your employer may offer bonus exchange, which works in a similar way, so you could use that too. Now, not all employers offer salary exchange, but there are some tax benefits for them as well.

So if yours doesn't, then it is definitely worth asking about that. So Clare, I've talked a lot about how money goes into your pension, but what happens to that money?

What happens to your pension contributions?

Clare: Well, if you're a budding pensions geek, then you'll know that your money is invested. You might even know where it's invested, but it can be a mystery to lots of people with a workplace pension. If you do have a workplace pension, your pension contributions are automatically invested in what's called the default fund unless you actively choose for them to be invested somewhere else.

Now, the reason for the default fund is it's there so that your money is invested in a fund that's suitable for you without you having to do anything. Now you can choose to move your pension money away from the default fund to a different fund. Now that's completely up to you and there's nothing stopping you from doing that, but most people, well they do keep it in the default fund.

So what exactly is the default fund? Well, when automatic enrolment came in in 2012, there were lots of rules and safeguards put in place. One of those rules was that a workplace pension has to have a default fund and it has to meet the needs of most of the members of the pension scheme. So different pension schemes have different default funds.

There are also rules about how much these default funds can charge. So it's capped at 0.75%, but some are less than that and performance has to be regulate reviewed too. Now if you're happy to keep your money there, then you don't need to do anything. But if you do want to invest your pension money in something else that's not the default fund, then you can switch your pension money into other funds offered by your workplace pension scheme.

You can choose the fund yourself or you can take advice from a financial adviser. If you do want to switch funds, you shouldn't be charged for doing this in a modern workplace pension scheme.

The important thing to bear in mind though is if you want to switch to a different fund or funds, what's the level of risk that you're comfortable taking and how much risk is associated with the fund that you want to switch to?

Sarah: And Clare, I mean, risk is a tricky concept to think about with investing.

So what does taking more risk mean?

Clare: Well, more risk can mean more growth in your pension, but also a higher chance of your pension losing money too. But it's also important when you think about risk in relation to pensions, to think about how far away you are from retiring or taking money out of your pension.

Now this is the kind of decision that a financial adviser can help you make. You might not have a financial adviser, especially if you're younger, but if you do want to find one Royal London, well, they've got some great articles on how to find a financial adviser.

Sarah: I think we might have written some of the content, actually.

Clare: I think we have. And we've also got a link to the adviser at directories. Now if you don't have a financial adviser, then your pension provider's website might have a tool that helps you work out the risk that you're willing to take and the risk involved in different funds. It will also have lots of other information on investment funds too.

Now if this is all a little bit head melty, then there's information on pensions and investments on independent and government backed money helper website too. And there's a session specifically on how is my pension invested later today. So that's investing Sarah. Although pensions are a way of saving for the longer term, you can't just set one up and then kind of ignore it, can you?

Sarah: No, absolutely not. Now, we mentioned the research we've been doing into the experience of employees with a workplace pension. And our latest research showed that almost one in 10, so 9% of people said they never or rarely check their pension savings. Now at the other end of the scale, almost one in five. So 17% said they check their pension savings weekly or more often, sometimes daily. Now you don't have to check your pension savings daily or weekly, but it is a good idea to check once a year at least. That way you can see how it's performing and how it's doing in relation to the kind of money you think you want when you retire.

Now these days, many pension providers have apps that will show you how much you've paid in how much your employers paid in, how much it's grown by, and they'll also give you an idea of what you could get at retirement.

Now the figure on what you can get at retirement is just an indication, it's not a guarantee. So it does come with quite a few health warnings and that's because it's based on certain assumptions around how much inflation could be between now when you retire and the level of charges.

But crucially, you'll get three different figures. Now these are based on a low, medium and a high rate of return. Now it can be tempting to look at the kind of the middle one and think, well, obviously that's the one I'm going to get, but it doesn't work like that. But despite all these kind of health warnings I've just given you, it is still a good idea to check this pension forecast regularly. And that's because it will give you an idea of the direction of travel and the gap that could be between the amount that you want and what you, what you think you'll need when you retire.

Well, you might be listening to all this thinking, well blimey that sounds like hard work. And it would be nice if you could just set up a pension, ignore it, and know it's going to give you exactly what you need for when you retire. But as with many areas of life, it's a little bit more complicated than that.

And not least because the amount that you want for a good retirement could be quite different to the amount somebody else wants for a good retirement.

Now our workplace pensions research shows that about a third of people, about 36% say they feel motivated to save more after checking on their pension savings. And about one in five said they feel really reassured about their financial future. But approximately one in four said it actually made them feel a bit anxious. They felt a bit sort of daunted by it all. And let's be honest, you know, pensions can be a bit daunting and a bit baffling, but they don't bite. I think it can be, you know, for many of us, it's itself an understandable reaction in a way that if we think something's going to be bad news, then it's tempting to ignore it and sort of bury our heads in the sand.

The problem is though, if you listen to that little voice on your shoulder telling you not to check on your pension savings, then you've got no idea how much you've got and then you can't take those next steps and to be in that better position when you retire.

Clare: So Sarah, how do you get started then?

Sarah: Well, knowledge is power. So the first thing is if you have information about your pension, then you can take those first steps to put you in that better position.

Secondly, I think it's really important to think about both when you want to stop work and how much you want to live on when you retire. Now that isn't really an easy thing to do, I think, especially if you are some years away from retirement, but there is an organisation called Pensions UK that's worked with some independent researchers at Loughborough University and they've looked at kind of what people are telling them that they want to live on when they retire and they've created three different lifestyles and they've put a cost against them.

And we'll look at those now with the next slide. Now they've created a minimum lifestyle, a moderate one, and a comfortable standard of living. Now for each of these lifestyles, they've included different examples of what you could spend on different things and put a cost against them. It is important to say that these figures that are on the screen now, they don't have any allowance for rent or mortgage, so they assume that you are mortgage or rent free.

So if you are paying a rental mortgage when you've retired, you'd need rather more than this.

And they also work on a take home pay basis. So they assume the tax has been paid. So let's look at them now in a bit of detail. We'll assume that you'll be entitled to the full new State Pension, which is in today's figures roughly £12,000 a year.

So for this first lifestyle, the minimum lifestyle, you'd need an income of about £13,400  a year. Now for that you would be able to pay all your bills and eat and all those kind of things, and you would have some money left over for going out, you know, for meals and for activities. And you could also have a holiday in the UK each year, but there wouldn't be much leftover for frankly, high living.

If you have £31,700 in your pension income, including your State Pension, then for that you'd be able to afford what's called a moderate standard living. Now here you can spend more on clothes and food. You've got a budget of over a £100 a month for, clothes and shoes, indeed £40 a week for activities and you could go abroad.

Now finally, if you saved enough for, an income of £43,90 a year, then you could have what's called a comfortable in living. So you know, more money to spend clothes and choose more on going out. You could do things like replace your kitchen every so often, have a car and so on.

Now if we go onto the next slide, if you are a couple, these figures don't double because obviously it's cheaper for couples to two people to live together than it is for one individual. But obviously you would need more. Thanks for that.

Now, whenever Clare, whenever we talk about the retirement living standards, many people do find them useful, but some people I think are quite daunted by the figures that we're sharing and thinking, well, I'm nowhere near that. But also that's not how I picture my retirement. And that's fine. You know, you may be brilliant at making a small amount of money go a long way, or maybe you picked your retirement as doing things that are quite low cost such as volunteering or spending time with family or signing up for free or low cost activities. But that's, you know, that's absolutely fine if you do though want to have the kind of life, you want to really push the boat out and go on cruises every year, see what I did there? Well, in which case you might need rather more in your pension savings, but if your pension savings aren't on track, what are the options?

Well, firstly, think about paying more in, we've talked about this already. Every little really does help and Clare will be talking in a moment about some ways to do this. But also it's about your kind of mindset. I think for most people, well, apart from us, maybe pensions rarely are at the top of the list until you get to a certain age when suddenly they feel really important.

If you can shift that age forward by even just a few years, that could put you in a better position to reach your pension goal. Now, none of this is meant to be a lecture on financial planning. It's just meant to be some tips to get you thinking or your pension.

So Clare, what's the next point we're going to talk about?

Clare: Well, we've been trying to help you understand your pension and you might have been listening and thinking, well great, I know I want more in retirement. I understand some of the benefits of pensions, but realistically how can I afford to pay more into my pension?

Or, you might know you want to pay more into your pension, but you just don't really know how you do that.

So that takes us onto our next question. How do you pay more into your pension?

If you have a workplace pension and you want to increase the amount you pay in every month, then you can normally do this by asking your employer. It's a really good idea to think about doing this just, around about kind of pay rise time because then you won't notice a reduction in your salary as much.

There might be a website where you can see the difference that it would make in your salary. And actually even by increasing your pension contribution, it might not make as much of a difference as you think because of the benefit of tax relief  that we spoke about earlier.

So it's always good to think about an example. So we've got another slide here and in this example we're looking at Marty. So Marty is an average earner. He's on £32,500 a year. He's 40 and he's paid into his pension since he was 22. The standard 8% is going into his pension at 67 he'll have a pension pot of £254,000. But what would happen if a total of 10% went into Marty's, pension instead of 8%?

Well at 67 there's now £290,000 in his pension pot. That's an extra £36,000. Now that she's in growth of 3% after charges. And while returns aren't guaranteed, you could get a higher return than that. Now you're probably thinking, well, you know, that sounds great, but how much would it cost?

Well, you can see in the slide that it would be an increase of £32.50 a month and that's not a huge amount of money while you're still working. But that could make all the difference in retirement. So that's, um, that slide done. Thank you.

Now there's another way to get extra into your pension. Now that's through something called employer matching. Now put simply, it just means that your employer will match your pension contributions on a pound for pound basis up to a certain limit. Now it's worth checking if your employer does this.

Our Royal London research found that over half of employers offered employer matching 54% and 37% of employees took advantage of this benefit. So how might that work? Well, the minimum amount that currently goes into your workplace pension is Sarah explained, is 8% of salary.

Now, of that you pay 4% and about 1% comes from tax relief, but your employer might match up to say 6%. So you wouldn't be paying that 6% though. In fact your employer, some of that 6% would come from tax relief and then your employer would pay 6% as well. So a total of 12% would be going into your pension. So instead of 8% going in, there's 12% going in. Now we've got an example on screen just now which explains employer matching.

And again, it's not as expensive as you might think it is. So in our example, the employee pays £80, that's top up by government, by actually from the government to £100. The employer pays in £100. So a total of £200 goes into the pension every month, but the employee agrees to do matching. So they now pay £120 into the pension that's topped up by tax relief.

So £150 goes into the pension. The employer also pays £150 into the pension. So a total of £300 a month is now going into the pension, but it's only cost the employee an extra £40 for that extra £100s.

Sarah: That is magic math though, isn't it?

Clare: It is great, brilliant. You know, it's, it's not a huge amount of money, but the difference for that a hundred pounds going in is magic. And then we've got the compound interest that we spoke about earlier as well. Yes. So that's how to increase the amount going into your pension on a monthly basis.

But especially as people get older, they might want to pay a larger amount into their pension. So that might be because they've paid off their mortgage and they've got some spare cash, maybe they've had a bonus at work. Or it might be because they've inherited or been given some money that we're seeing more of this right now with people who are older and in a position to do so, wanting to pass on wealth to reduce, the amount of inheritance tax due.

Now paying into your pension the like can save you tax as well as increase the amount you've got in retirement and that's because pensions reduce the amount of salary that you pay tax on. So this might be really useful if you receive, say a bonus at work because that bonus, well it could move you into a higher tax bracket, but if you pay more into your pension then it can take you below that again.

So you'd pay basic rate tax instead of higher rate tax. There's also an added advantage if you're age 55 or over currently or 57 and over from 2028. So not only do you get the benefit of tax relief potentially, lowering the amount you pay tax on, but if you did need to access the pension then you could take that money out straight away.

So say you wanted to take out your 25% tax free cash, if you want to pay in much larger amounts to your pension though, especially over £60,000 a year, then there are other things that you need to think about because it's even more complicated.

But we're not going to cover that today. There is a lot of information about what's called the annual allowance on the Money Helper website and if you do want to put really large amounts into pensions, then it's a really good idea to speak to a financial adviser and get their help.

Sarah: Well, as you said, talking to a financial adviser is invaluable if you are thinking and you're in a position to pay large amounts into your pension.

But also if you're thinking about your retirement and how to take money out of your pension. But many people don't take financial advice now, figures from the financial regulator, the Financial Conduct Authority show that only right fewer than one in 10 people had taken financial advice about either pensions or investments in the previous 12 months.

But there is other help available. So your pension provider is an obvious place to start. So many pension providers now have guides and tools on their website and apps and Clare and I've mentioned here, we've written a lot of guides  for Royal London, anything from like the State Pension, how your pension works, annual allowance, tax relief.

But a lot of pension providers will also have guides and, and calculators that can help you to think about your retirement and how much you might need to live on. Or they may have a tool that will show you when you'll get your State Pension or um, how much paying extra could make in terms of a difference to your pension.

Now these are not designed to be advice, but they are aimed at pointing in the right direction. It is maybe worth explaining though a change in the rules that's due to come into effect from next April.

So currently pension providers, you know, can't offer advice. Neither can financial services companies, financial advisers are the only people who can offer financial advice to their clients.

But from next April there's something called targeted support that's being introduced, which will be free of charge and that's something that financial services provides, including pension companies may start offering.

Now, again, this is not designed to replace financial advice, but what it is designed to do is to give customers actionable steps that they can take based on people like them. So it should mean that you start to see more information from your pension provider on steps you can take to put yourself in a better position for when you retire.

But before then there are still plenty of other sources, of help and information. So your employer is one for example. So they will have information about paying money into your pension and even what options you may have when you retire.

But Clare's already mentioned the independent and government backed Money Helper website. Now that's got loads of content articles and guides on pensions, all kinds of explainers, but it also has a tool on its website where you can find details or put in details of your current pension savings and it will tell you what you may get at retirement.

Now if you are aged 50 or over and you have a defined contribution pension, so pension pot type of pension, then you are also entitled to an appointment with something called Pension Wise, which actually Money Helper operates.

Now you can either have this as a telephone appointment or you can do online if you prefer. Now it's a brilliant free guidance service that will explain your options at retirement. And finally last but absolutely not least, there's the Pension Geeks!

Yay. Now this week there are loads of fantastic webinars and of course there's information on the website which Jonny you mentioned right at the start of this session.

But before we go, before we hand back to you Jonny, just three things, uh, we'd like you to think about. So firstly, learn to love your pension, find out what you've got and also what that might mean when you retire.

Secondly, think about paying more money into your pension if you can find out about what the options might be.

And thirdly, think about the kind of lifestyle you want when you retire and actually when you'd like to do that. So that's it from us.

Back to you now, Jonny!

Jonny: Wow, what a fantastic show. What did you think Rach?

Rachel: Absolutely, yeah, so helpful. Lots of really insightful information there. So thank you. Thank you so much.

Jonny: I was going to say we've got 10 minutes for questions I've seen beside me, Rachel's being typing loads of questions, loads of answers, in the chat.

So before we tackle the questions for 10 minutes, I just wanted to say I love the diagram that you put together, the matching employer diagram showing the power of you putting money in your employer putting money in.

Fantastic. Really brought that to life for me.

Great show. Thank you to both of you. Rach, do you want to start with the questions now?

Rachel: Yeah, let's do it. Let's, let's dive straight in because I know we haven't got a great deal amount of time left.

So first of all, I'm going to go to this 25% lump sum tax free amount because it seems to stump people this one.

So there's a few questions around this. So let's try and help everyone with some clarity on this one. So if you wanted to take the 25% tax free amount out of your pension, what happens to the rest of the pension pot?

Sarah: This is such a brilliant question. So, and this is one that we get all the time. So Clare, just explain what has to happen for you to be able to take that 25% out. What has to happen?

Clare: Something has to happen. I think that's the key point. So you can't just take 25% out of your pension pot and leave the rest in your pension pot. So something else has to happen at the same time. So you've got a few choices really. You can take your 25% tax free cash and then move the other 75% into drawdown. So drawdown just means it's a bit like being in your pension pot, it stays invested now you don't need to then touch that other 75%. So that's sometimes a good idea if people are still working because they don't need any more taxable income and it can just stay there and hopefully grow.

Other options more If you are thinking about stopping work, you can take your 25% tax free cash and then buy an annuity. So that's that secure guaranteed income with the other 75%.

So that would then start giving you an income every month or every year, however you set it up for the rest of your life.

The other choice is that you can take the money out of your pension pot as a cash lump sum. So 25% is tax free, but you have to take the other 75% at the same time and that's taxable.

Now that's not always a good idea if you're still working because that other 75% well it's just going to sit on top of your taxable income. And it also does things like trigger something called the money purchase annual allowance, which then restricts how much you can pay into pensions.

So say you’re 55and you take one of these cash lump sums out, but you still were wanting to pay quite a lot into pensions. You'd be restricted to paying in £10,000 a year because you'd taken that other 75% of taxable money. So it's about thinking about kind of what's right for you at the right time and what the impact of that might be.

And that's when kind of appointments with pensions wise can really help with this. Your pension provider if you phone up will probably say, do you know that if you take a cash lump sum for example, then that's going to trigger the money purchase annual allowance or you know, they can explain how drawdown works for example.

Sarah: And I think one question we often get asked as well is, if you're taking tax free cash from one pension but you've got three pensions, can you take it from each of them?

And the answer is yes, you can. You know, you're not limited from a 25% tax-free lump sum just from one pension if you have several hope that's helpful.

Rachel: That very helpful. Thank you. And that was my next question, Sarah.

Sarah: So two for the price of one there.

Rachel: You read my mind there. Further to that, so I'm going to ask this one when can you take that 25% tax free amount?

Sarah: Well, the, the, the simple headline and then you'll probably develop on this is you've got to be age 55 or over to take any money out of your pension under the current rules. And as you mentioned a couple of times during this webinar, that's rising to 57 from April 2028.

But that doesn't necessarily mean you should take it out at 55.

Clare: That's right. So if you don't need the money then it might be better staying invested. But you know, often people want to do something kind of big when they can access their pension savings,

Sarah: Holidays, news kitchens, all of these different things.

Clare: But you don't need to take all of it out. So say you have a £100,000 in your pension pot, you don't need to take £25,000 out as tax free cash and then say move the rest to draw down.

You could, if you needed £10,000 for a holiday, take £10,000 out and then you'd move the other 75%. So that would be £30,000 into draw down.

And it's also worth it saying that some people do have the right to take tax free cash when they're younger.

So that might be because you've got a right through a kind of older type of pension scheme.

It might be because you're in the police, if you're the armed forces, you've got a certain type of job. Things like professional footballers, there's kind of some categories so some people can get access to that money earlier.

But for the majority of people currently you have to be age 55 and that is increasing to 57, in 2028.

Rachel: Great stuff. Thank you. That's brilliant. Next question, I'm going to go to this one. If you take an annuity, can you still contribute to your pension?

Clare: Yes. So it's because it's so it, the rules about kind of contributing to your pension and you still can, if you, if you trigger this money purchase annual your loans, you still can pay the £10,000 a year into your pension. You just couldn't pay a lot more.

And sometimes as people get older, they really do want to pay a lot more because maybe for example, they have paid off their mortgage  but an annuity and if you have a pension  from a defined benefit pension, so the most common now are public sector pensions. They don't trigger this money purchase annual loans.

So if you're receiving annuity income, you're not limited to that £10,000a year. So you could theoretically be receiving an annuity, as well as paying more than £10,000 into our pension.

Sarah: Yeah. Time for one more or are we running out of time? Yeah,

Rachel: Let  try and we'll try and do a quick, quick fire round, if you are paying into a workplace pension, are you eligible for State Pension as well?

Sarah: Oh now this is an interesting one because the State Pension when you get the State Pension, that's nothing to do with when you stop work and how you build up the State Pension is based on your national insurance contributions.

So the, the new State Pension, which is introduced not so new anymore, it's introduced in April, 2016. For that you need to have 35 years of national insurance contributions to get the full amount. Now you build up those national insurance contributions either by paying national insurance when you are working, so that could be when you're employed or when you're working for yourself.

But also if you are not working, if you are claiming certain benefits, then that essentially builds up your national insurance on your behalf.

So whether you are in a workplace pension or not, um, that doesn't mean, you know, just because you've got a workplace pension doesn't mean you can't have the State Pension or you won't get it and you can take money from your workplace pension before you get your State Pension.

So currently the State Pension age is 66, which means you cannot get your State Pension before you're aged 66, but from next April it starts rising to 67. But there isn't that link between you stopping work and getting your State Pension or taking money from your workplace pension

and getting your State Pension.

Clare: And a lot of people take a little bit more from their work, you know, they want to stop work or even go part-time and they start to take a little bit from that pension and that kind of bridges a gap until they reach State Pension age.

So there's different things you can do. So some people do choose to stop earlier than State Pension age

and use their workplace pension savings for that.

Rachel: Great stuff. Thank you. I'm going to move over to the topic of salary sacrifice as I know we, we touched on this, but, a few people want to know how, first question is how do you go about being in a salary exchange, salary sacrifice scheme?

And the second part to that is do you need to claim back the tax if you pay into your pension via salary sacrifice?

Sarah: Really good question. So if I take the first bit, so it's, it's your employer that kind of makes the decision because you, if your employer hasn't set up your pension where the contributions go through salary exchange or salary sacrifice, then you can't do it that way and you know, through that workplace pension because it's done on an employer basis. But as I mentioned earlier on in the webinar, if your employer doesn't already do that, there are some tax benefits for them. So it is always worth asking if they would think about it because some employers just aren't aware of how it works and how it can benefit them as well as their employees.

So it's not on an individual basis, it's on the kind of employer basis. And then on the tax relief point

Clare: You do get all of your tax relief if you're in a salary exchange scheme because of the way it works and which kind of your salary has reduced. So it is good if you're a higher or additional rate taxpayer to be in a salary exchange scheme because it just means you're not having to go through that process of claiming your tax back from HMRC.

So you do get all of your tax relief no matter what tax rate that you're paying.

Sarah: I think it can be confusing because you may not feel like it because you're not getting that extra bit.

But actually because I say because it comes off your, comes off your salary, that's how you get that tax benefit.

Jonny: Do you think we can get one more question in Rach?

Rachel: Yeah, I think we can. Let's do it. It's a bit of a morbid one but, I'm going to add this one in because it's had a few comments on it.

So people would like to know what happens to your pension, when you die, can I leave it to loved ones, grandkids, etc.

Sarah: Clare, this is your, one of your specialist subjects, so I feel you should do this one, but it's a really important one though, isn't it, to talk about.

Clare: Yeah, it is really important. And Jonny mentioned earlier about the checklist and filling in a nomination of beneficiaries form, sometimes known as the expression of wish form. So if you have a defined contribution pension, like most workplace pensions apart from public sector ones, you'll have a pot of money if you die that, you know, you can say that you would like that money to go to whoever you'd like.

So it can be your husband, wife, the person you live with, children, grandchildren, it can be friends, whoever.

And it's really important to fill in that form so that if the worst did happen, then the pension scheme know who you would like to receive those benefits. And it's a good idea to keep that up to date.

I've seen forms that are 20 years old and there's been, you know, people have been married, multiple divorces, multiple divorces, multiple children, and it's really hard for the pension scheme to then kind of work out, well where should that money go so that it can be passed on to whoever you want.

And they would then have a choice of whether they take it out as a lump sum and or they could take it out as  they could go into draw down and they could take out straight away.

So although the rules about accessing draw down are that you have to be 55 currently, if you inherit a pension, then you could have someone who's each five, for example, receiving money from, from that pension.

Sarah: So I think the important takeaway is that it's down to you. You can choose, but you have to tell the pension company. because they won't necessarily, they won't know.

So make sure you fill in that beneficiary form and keep it updated.

Jonny: Wow, wow. Fantastic. Thank you Rachel for other questions.

Rachel: No, thank you for the answers. That was really helpful. Thank you.

Jonny: Really brilliant. Well, it, we've hit, we've hit the time where we have to close this show down.

What a fantastic show to start the campaign. We're here for three days. Yeah, Monday, Tuesday and Wednesday. We've got three shows every day.

Make sure you go to the website and register if you haven't.

A big thank you. Can we just go back one more time to say big thank you to Sarah and Clare? Yay. Wow. What a great show. What a great show. And big thank you to Royal London as well.

We look forward to seeing you at 1230 today. We'll be joined by Barry and Sam and we'll be talking about when can I afford to retire?

When can I afford to retire? Great question.

We'll see you then. Bye. Bye. Bye.