James Walker: Never too soon to face facts about pensions

Many of the people I speak to worry because they don't know much about pensions. They realise that choices they make about retirement now will have far-reaching consequences, but find the whole topic daunting in its complexity.

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That is why we’re launching a campaign to make things simpler. If you’re one of those struggling to get to grips with the subject, here are some basic facts.

There are three main types of pension. The state pension (paid for by the government), “occupational” pensions (arranged by employers, who also make a contribution) and private/personal pensions (which, apart from tax relief, are funded entirely by the individual).

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The state pension comes from your National Insurance (NI) contributions over the years. Unfortunately the age at which it pays out creeps ever upwards, with lots of controversy recently around the decision to move women to the same retirement age as men.

Work pensions come in two main types. Final salary (or defined benefit) pensions are dying out. Most of us have “money purchase” (defined contribution) pensions now. The difference matters. Final salary pensions generally pay out much more, which is why there’s a big battle between workers and bosses over the last few remaining.

Worried that you’re not saving enough for retirement? The important thing is to act now. You don’t have to put money into a pension but you should put some money aside. There are loads of ways you can do this. Our colleagues at MoneySavingExpert have a great guide at www.moneysavingexpert.com/savings/discount-pensions.

Some people opt to combine their previous work pensions into one, or move their occupational pension to a private one. If you’re transferring or taking out a private pension, you can’t beat good advice. Make sure you ask for everything to be explained simply and in writing. Ask how much commission the business/pension company will take. And don’t ever be afraid to say you don’t understand.

If you need more information or want to make a complaint, check out Resolver’s guide at www.resolver.co.uk. Our friends at The Pensions Advisory Service (TPAS) have a great website with tons of information at www.pensionsadvisoryservice.org.uk. And if you’re approaching retirement age with a defined contribution pension pot, speak to Pension Wise at www.pensionwise.gov.uk/en.

James Walker is the founder of online complaint-resolution service Resolver.co.uk