Archive: MoneySavingExpert's Money Tips Email

Martin's 18 pension pumpers
 Need-to-knows to protect & boost savings for, and in, retirement

  Incl... don't miss out on hidden pay rises | avoid leaving your pension to your ex | boost state pension by £1,000s | cut tax | find £10,000s in lost pensions | free 1-on-1 help  

On average we live 85ish years, but only work 45 of them, so that work needs to pay for a lot of years. You may say "but it's parents who pay for us when we're ickle", but then again most adults then pay for their children too, so it often evens out.

All that means saving for retirement is crucial. Yet pensions are often bad-mouthed, under-managed and ill-understood. So today I've key tips and need-to-knows. This is not a comprehensive guide, more an appetite whetter for tooling yourself up with knowledge about...

- State pensions: Income from state once you're a set age (today 66+).
- Private pensions: Tax-free savings only usable from age 55.
- Company pensions: Pensions via employers, which they contribute to - either build up a pension pot of cash or a 'final/average salary scheme'.

For an easy briefing, if you missed it, do catch up on my step-by-step TV pensions special from March. Now to the tips...

1. Don't accidentally leave your pension to your ex. You CAN'T LEAVE PENSION SAVINGS IN YOUR WILL. Die before taking your private or company pension and the provider/trustees decide what to do with it. An expression of wishes (or 'nomination') form tells them your preference.

You need to fill one in - many have, years ago, without realising, so check it's up to date - see expression of wishes help. As Floochy tweeted: "@MartinSLewis - had a case where a colleague's ex-husband was still on her nomination form. Family had to contest. A nightmare for all involved."

2. The big pension boon: it's saved from PRE-tax income. Normally for every £100 you earn, a basic-rate taxpayer only takes home £80. Yet save this in a private or company pension and in simple terms, one way or another (more below), the whole £100 goes in. A huge gain you don't get with other savings / investing. PS: I've ignored national insurance to keep the concept simple.

3. Defer taking your state pension and you get more: is it worth it? The state pension is boosted by 5.8% for each year you defer (you can defer part years too), so defer one year and someone on the full 'new' state pension would gain £500/yr extra. Yet, of course, you won't be getting it for as long, and it can impact how much tax you pay. See our Should I defer taking my state pension? guide.

5. There's £27 BILLION sitting in lost, old pensions. Are you one of those with £10,000s hidden? After watching one of my TV shows on lost pensions, Rob got in touch to say he'd checked the free Pension Tracing Service, after it'd triggered a memory of signing up to a long forgotten pension in his first job 30 years ago.

This helped him locate his old provider, and he found he'd paid in £24,500, and it was now worth £97,000. Gobsmacked, he then checked through his box of old papers, and found another pension from the 1990s he'd paid £600 into, traced it, and was shocked to find it was now worth £24,000.

This is my long way of saying... it's worth a check.

6. SCARE-TIME. Take your age when you start(ed) saving in a pension - and halve it... that gives you a rule of thumb of the % of your salary to aim to put into your pension for the rest of your life for a good pension income.

So start at 20 and it's 10% (this includes employer's contributions), at 40 it's 20%. Don't worry, almost nobody does it, but the real takeaway is start as early as possible with whatever you can, as you've longer for the gains to compound. See our beginners' guide to pensions for more.

7. Are you an employee? Don't throw away a hidden pay rise. This is about auto-enrolment pensions - almost everyone should try to avoid opting out - or you're throwing away free cash from your employer. See my Important warning to every employee explainer (including video) for why.

8. Can you boost state pension for FREE with missing national insurance (NI) years? (Grandparents especially.) Carer? Had a career break? Had an illness? You could be due NI credits which can boost the amount of state pension you get. Most are applied automatically, but some you have to claim, including grandparents/others who childcare for close relatives, spouses of members of the armed forces, and those on a government-approved training course. For more see our Are you due NI credits? help.

As @MickLumley tweeted: "@MartinSLewis I can't thank you enough. My wife retired five years early to help with our grandchildren. She was four years short of full state pension. We will now save £3,000 not having to buy missing years." 

9. Under 22, over 66 or earn under £10,000? A way to make your employer contribute to a pension for you. If you're in these categories, you don't automatically get a pension contribution from your employer, but many have a right to make it do it. So if you're under 22, over 66 or earn under £10,000, click the link and have a read or watch m'video on it.

10. Self-employed and want a pension? Pension saving is very valuable, necessary for most, to ensure you've cash in your older years. There are tax advantages too, in simple terms...

• You automatically get 20% tax relief. So for every £80 you pay in, the Government adds £20, bringing your payment up to a total of £100 (see How much can I put in my pension?).
  
  
• If you pay tax at a higher rate (40% or 45%) you can usually claim the rest back via your tax return (which you need to do anyway). This isn't added to your pension but reduces your tax bill on other income.

As for where to start, guidance or advice is always worthwhile, but as a primer see our beginners' guide to self-employed pensions.

11. State pensioner earning under £220/wk (or couple under £320/wk)? You could be due £1,000s. Nearly a million pensioners are missing out on pension credit, a vital benefit worth £1,000s a year for many, which tops up your income.

Yet that's just the start - even if you'd only get a quid or two, I call pension credit a 'gateway benefit' as it opens the door to a whole host of other payments too such as cost of living support, council tax reductions, free TV licences and more which can be worth thousands. Do read Are you missing out on pension credit?

13. Annuity rates are at their highest for years, but NEVER just grab the one from your pension provider. Now here's a clever idea: just imagine that with your pot of money saved up in a pension (company or private) you could buy a product that gives you the security of a fixed, sometimes inflation-linked, income each year for the rest of your life. You can, it's called an annuity.

It used to be the way almost everyone took their pension, but then new 'pension freedom' rules meant the mandate changed. The problem with annuities is while the idea is good, the rates have been pants.

Yet with interest rates rising, annuities have become an option again for some, for some of their money (especially useful when older, say, 75+). When a few years ago every £100,000 of pension savings would only get you £4,000/yr of income, in the same circumstances now it'd get £6,000. Though do get guidance/advice to ensure it's right for you.

There are some key rules if you're considering it though.

• DON'T just get an annuity from your pension provider without checking elsewhere (start with a quick annuity comparison), as you could be locking in many £1,000s less each year for life.
  
  
• DO remember if you've health issues, or are a smoker, you may be able to get a special higher rate.

14. It's important to know when you're likely to die. You can currently take your private pension money at age 55 (rising to 57). Yet one big question is how long you'll need it to last.

- Spend it all too soon, and you'll have a poor retirement.
- Be overly cautious, especially when you first retire, and you'll have a worse lifestyle at the time when you can most enjoy it.

Don't underestimate your longevity - your health, genetics all affect it, but your current age is the single most important factor. The Govt has a basic tool, the life expectancy calculator, as a start point. Here's the situation for someone aged 65...

15. Important. Taking money out of your pension can be very taxing, if you do it the wrong way. Don't start taking money out without first getting guidance, as get it wrong and some pay £10,000s more than they need to in tax. My swiss roll 'taking your pension' explanation (yes, the sponge cake) may help you understand it (and make you peckish).

16. Woman aged 70+? You may be due £10,000s back due to errors in your state pension. 100,000s of married or now divorced/widowed women on the 'old' state pension (those who hit state pension age before 2017) are due big bucks due to pension system errors, mainly as they didn't get the cut of their husbands' pensions due.

It's often about if the wife receives under 60% of the husband's state pension. There's a full eligibility list in Are you one of 100,000+ women missing out on £1,000s of state pension? Many will now automatically be refunded, so I want to highlight situations where you have to claim.

• You got divorced AFTER reaching state pension age, and haven't had your pension reassessed.
• Your husband turned 65 before 17 March 2008 and you get less than 60% of his basic state pension.
• You're a married woman who's on zero state pension, getting a small amount of additional state pension / SERPS.

As Annette emailed: "I watched your programme saying that a married woman's state pension should be 60% of their husband's and found mine fell short. I wrote to the Pension Service and have just been advised I've been underpaid since Nov 2008 and will shortly receive £17,202.26 into my account. Thank you so much." 

17. Should you consolidate your private or company pension? This was one of the most asked questions when I did my pensions show. The advantage is it's easier to manage and keep track of one pension, but I'm afraid there's no simple solution. As financial planner Sarah Lord told me on my show, it mainly depends on... 

- Will charges on the consolidated pension be cheaper than now?
- How the investment choices compare and your attitude to risk
- Are there any exit penalties or hidden benefits that apply to your current schemes?

This is a good reason to get some guidance or advice (see above for how) before you do anything, as get it wrong and it can cost you. For more explanation read our Pension need-to-knows guide.

18. On a final salary pension? Be careful cutting your hours before retiring. If you're thinking of reducing your hours, check your scheme's rules before you agree to a pay cut. A few rules state that it's literally a percentage of your final salary - in which case dropping hours could cost you large. Do check before making a decision.

PS: Thanks to the MoneyHelper team and independent pension adviser Charles Riches of London-based Capital Asset Management for giving this a read-through to double-check everything for me.