A Guide to Understanding Your Pension Statement

A Guide to Understanding Your Pension Statement

Every year, you’ll receive a pension statement detailing the progress of your savings so far. It’s easy to stow this document away and forget about it, but actually, your pension statement contains useful information that should inform your financial planning 

The Hansford Bell team have years of experience helping clients across the UK plan the retirement of their dreams. We can help you understand how your pension is performing and whether it could be improved.  

In this blog, we explain everything you need to know about your pension statement. 

What is a Pension Statement? 

A pension statement is a summary of your retirement savings over the course of a year. The statement will provide a range of useful information including the value of your pension fund currently. It may also provide an estimate of how much income you can expect to receive if you convert the fund to an annuity when you retire. However, there are other options when it comes to withdrawing money from your pension. Pension drawdown – the other main method people choose – allows you to withdraw an income, whilst your fund remains invested. 

How Do I Get a Pension Statement? 

Pension statements are mandatory for defined contribution schemes – the most common type of pension available today. That means, your provider must send you a statement every year. If you aren’t receiving these, it may be the case that your address or records are out of date, so be sure to check this with your provider. For defined benefit schemes, pension statements are not mandatory, however you can request one by getting in touch with your provider. If you do, they must send it within 2 months 

What Does a Pension Statement Tell You? 

Pension statements contain valuable insights into the health and progress of your pension. They will detail: 

  • The contributions made over the last year by you, your employer (for workplace pensions), and the government through tax relief.  
  • The value of your pension at the start and end of the year. 
  • Information about how your money is being invested. 
  • Details of any special features e.g., guaranteed annuity rate. 
  • Pension transfer value.
  • Your selected retirement age or normal retirement date.
  • A projection of the income you might expect to receive in retirement (this is by no means guaranteed).

It’s important to bear in mind that pensions are long term investments and therefore may see short term ups and downs as a result of various economic factors. If you’re concerned about your pension statement or need help working out if you’re on track, it’s always best to speak to an expert. 

What is the Difference Between Pension Fund Value & Transfer Value? 

The term ‘pension fund value’ relates to the current value of your pot. Pension transfer value or cash equivalent transfer value (CETV) is what you will receive should you decide to transfer to a different scheme; it will become the value of your money if you move it. CETV depends on a number of factors, including your age and your provider’s transfer policies. If the CETV is significantly less than your pension fund value, be wary of transferring as this indicates you will be charged an early exit fee.

How to Use Your Pension Statement.

Don’t just file your statement away; pension statements can be extremely useful when it comes to planning out your finances.  

Retirement Planning 

With a range of helpful information, your pension statement can be a valuable tool for retirement planning. Figures such as the current value of your pension and its expected growth can enable you to check whether you’re on track to receive the income you need in retirement. This will reveal whether the later life goals you already have are within reach or enable you to plan new ones accordingly. Your pensions statement will also come in handy when it’s time to decide how to withdraw your retirement income 

Review Your Investments 

Your pension statement will outline the fund or funds you are currently invested in. If the performance of these funds isn’t harmonising with your retirement plan, it may be time to make some changes. It’s important to bear in mind that pensions can go down as well as up in the short term, and this isn’t necessarily something to worry about. As ever, if you need help deciding on how to invest your wealth, it’s always best to enlist the support of a specialist financial advisor. 

Retirement & Pension Advice with Hansford Bell.

Hansford Bell is a team of financial planners based in Tavistock with years of experience helping clients make the most of their money.

With our fresh approach to retirement planning, you can put yourself in the best position to achieve your goals – even the non-financial ones. 

Ready to get started? Contact us today to arrange your free initial consultation! 

Note: This blog is for general information only and does not constitute advice.