Where to start?

Browneyedg

Hi, I have been burying my head in the sand with my pension but as I have gotten older (49), I realise I need to understand what my statements mean and then decide if I either pay in additional funds, pay off my mortgage (£32,000 left) or invest the £400 I normally put in to a low rate saving account.  I have a few small pensions but my main one is my NHS (17 years) and I am not sure what figure is my "pot" is it my total value of LTA used?  

Do I need to go see a separate Pension advisor to check what I have and then gather the smaller ones together and then go and speak to a financial advisor?  I am a bit concerned my Pension person might advise to put everything in to my pension.  Any advice gratefully received.  G

dunstonh

and I am not sure what figure is my "pot" is it my total value of LTA used?  

The NHS pension doesnt have a pot.  It is not that type of pension.    Your last statement of benefits on the NHS pension will give you an indication of the pension you could get in retirement.   17 years is not a lot but its better than nothing.  If you are still an active member of the NHS scheme then you will be building more years into it.   It is one that is based on years of service rather than fund value.

Do I need to go see a separate Pension advisor to check what I have and then gather the smaller ones together and then go and speak to a financial advisor? 

There isn't a role called a pension adviser (at least not in a regulatory sense).   IFAs (not FAs) cover it.

 I am a bit concerned my Pension person might advise to put everything in to my pension.  

It sounds like you are behind on your retirement planning.  So, it will likely be that you would be told to do more.    You have a very small mortgage which will likely be at very low interest rates.    So, financially, it is unlikely reducing the mortgage will be the best option.

tacpot12

It will help you to make a list of each pension, who it is with, and what it will pay you per year, and at what age. For Defined Contribution (DC) pensions, they won't tell you what they will pay you, they will tell you what your pot is worth.

It may be beneficial to combine some of your pre-existing DC pensions. The main factors to consider are charges and choice of investments. The pension you should keep is the one that has the lowest charges but which also allows you to invest what you want to invest in. An IFA can help guide you if you need help to decide what to invest in, or you can research this yourself with the help of books, the internet and the MSE Savings & Investment forum. An IFA would also be able to help you decide there is a better DC pension schemes for you than your existing scheme, and if so they may recommend consolidating all your pensions into a new one - you can ask them to restrict their advice to just advising you which of your current pensions is the best for you if you wish, but clearly this might result in a missed opportunity.  

You also need to make a budget of your living costs This will tell you what income you need to live on. You should prepare two versions of this figure. One excluding the mortgage, and the other that includes your normal mortgage payment. You also need to know when your mortgage will be repaid if you only make that normal mortgage payments . You should also get a forecast of your State Pension Entitlement. With this data, you can work see what income you get in your state retirement year vs. what income you need (assume your mortgage will be paid off by the time you reach the state retirement age). Then, working back from your state retirement age look at what income your Defined Benefits (DB) schemes will pay you and when. I would start by assuming that you will take these pensions at their Normal Retirement age, which may or may not be the same as the age at which you will receive your state pension. (Defined Benefit/DB scheme are ones like your NHS Scheme where they tell you what they will pay you as an income per year or month)

You are looking to find the first point at which your income needs cannot be met by the income you will receive from your DB pensions. At that point, if you want to retire you will have to support yourself with your DC pension pots. It will help you if you are still paying your mortgage at that point. If you aren't you will need less from your DC pots to support yourself, if you are, then you will need more. I would say that you can ignore the effect of investment growth after the age of 55, but before then you can assume that your pension investments (in your DC pensions) will return about 3% per annum. This reflects the likely return after inflation and assumes that the investments are invested reasonably well. If your investments have returned an average of 7% per annum since you stopped contributing to the pensions, 3% is a reasonable assumption for their performance after inflation. So multiply your pension investments by 1.03^n to estimate what they will be worth in n years time, where n is the number of years you have got left before you retire. e.g. if you think you can retire at 55, n = 6 (55 -49) and 1.03^6 = 1.194, so you would multiply the total of your DC pots by 1.194. You can then allocate this money to either paying off your mortgage (if it hasn't already been repaid) or to supporting yourself before your DB pensions and state pension kick in. You need to spread the money out so that you can see how you will covering your income. I would do this in Microsoft Excel or using a Google Sheet.  

An IFA can help you do all this, but a family friend who is good with money will also be able to help with the calculations, but not the investment advice or comparing different DC pensions schemes.