Financial expert explains how to get the most from your pension
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Pension pots can often be essential for many people for retirement, and are usually planned decades in advance. For this reason, Britons will want to benefit from their savings later down the line and truly enjoy their retirement. However, many could be at risk by failing to understand whether or not their arrangement is protected.
Some 40 percent of people saving into a pension have not checked whether their pension is protected by the Financial Services Compensation Scheme (FSCS).
This is according to a survey of 2,000 people which demonstrated a lack of understanding when it comes to the matter.
The FSCS is a body which compensates people when firms go bust, and can be vital in keeping Britons hold of their cash.
The survey also found more than a fifth of those asked have never checked their pension balance.
Caroline Rainbird, FSCS chief executive, said: “Funds, which we build up over a long period of time, enable us to enjoy an important period of our lives – whether they are used to fund travel plans or hobbies, or provide for our families.
“While we don’t need to be checking our pension pots as often as our day-to-day accounts, it is important for people to know how much is in them, so they are aware whether they are on track to be able to afford their retirement dreams.
“When they are checking their current pension savings or thinking about making a change to their investments, it is also important to know their money is protected if something went wrong, for reassurance and peace of mind.”
If a pension provider were to go bust, the FSCS might be able to step in to help.
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The body could also pay compensation to make sure Britons are not left out of pocket.
Personal finance expert and editor-in-chief of LendingExpert, David Beard, also examined the matter.
He said: “This is worrying but sadly not surprising news.
“We know people aren’t squirrelling away enough money to build up a sufficient pension pot.
“Therefore, it doesn’t surprise me people aren’t prioritising checking what type of pension they’re paying into either.
“It’s not just young people entering into the workforce who aren’t prioritising their pensions.
“Those who aren’t comparing or checking their pension pots are people in their 30s, 40s and 50s who’ve grown up assuming their pension will give them the same kind of retirement their parents have.”
Mr Beard has described pensions as “complicated financial products”.
As a result, Britons need to give them a good amount of attention, and regularly keep an eye on their savings.
However, according to the expert, responsibility also falls on pension firms.
He has called for these organisations to do more to ensure Britons fully and easily understand their pension arrangement.
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Mr Beard added: “Few understand their pension – it’s just money that disappears off a line on their payslip.
“We must wake up and care about where our money is going, if it’s protected and if it’s working for us appropriately.”
The FSCS themselves has acknowledged the complexities when it comes to pension arrangements.
Their website states that out of all the financial products covered by the body, pensions are “probably the most complicated”.
Thankfully, checking pension protection does not have to be a laborious process.
Individuals can make use of a tool on the FSCS website designed for this very purpose
The Pension Protection Checker prompts Britons to tell the service about their pension arrangement.
This will help them to determine how much, if any, pension protection they could get should the worst happen.
The service is free to use, and the FSCS is an independent body. People will keep all of the compensation they may be owed when they claim directly through the FSCS.
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