Retirement planning can sometimes seem daunting, but it doesn’t have to be! You might be used to reviewing your pension balance once a year, but nowadays, you can check your balance anytime if you have online access.
Whether you’re checking your balance through an app or conducting a more in-depth annual review, understanding your pension statement is essential for making informed choices about your retirement.
What your annual pension statement shows
PensionBee’s Senior Team Leader, Alex Langley says: “It can be a bit difficult to track down a pension. One of the best ways is to speak to your previous employer. If you don’t know how to get in touch with your employer, you can always use the government’s Pension Tracing Service. You might also want to look back at previous bank statements, because that can give you a clue as well.”
A pension statement is an annual summary sent to you by your pension provider. This is more common with defined contribution schemes, but if you have a defined benefit pension you can request a statement if needed. Familiarising yourself with your statement can help you to make proactive decisions to boost your pension balance. It typically includes:
Contributions - a summary of your contributions for the year, employer contributions (if applicable), and any government tax relief received.
Fees - a breakdown of any administration fees, fund charges or platform fees associated with your pension account.
Investments - details of where your pension money is invested and the performance of these investments over the year.
Transfers - the value of any money transferred in or out to another pension, allowing you to track changes in your pension’s assets.
Value - a grand total of your pension’s value at both the start and end of the statement year, allowing you to see how your savings have grown over time.
Withdrawals - a summary of any withdrawals made from your pension during the year, providing insight into how much money has been taken out.
What happens if you’ve lost your pensions?
If you have a pension, but aren’t receiving statements, you’ll need to contact your pension provider. You can find their details on any pension paperwork you may have received when you joined the scheme. If you’re a member of a workplace pension scheme and aren’t sure who the provider is, ask your employer.
The older you are and the longer you’ve been working, the more likely it is that you’ll have started several pensions with different employers. You can also use the government’s Pension Tracing Service to locate any lost pensions, especially if you’ve changed jobs or addresses.
What type of retirement are you aiming for?
Behavioural Economist and Director at Fairer Finance, Tim Hogg says: “We tend to have what’s called a ‘present focus’. We’re focused on the present time, rather than the future. And this can lead to slightly inconsistent decisions. And what that means is if we’re continually putting it off like that, we never quite get around to putting enough into our pension pot.”
The Pensions and Lifetime Savings Association (PLSA) provides financial benchmarks for three retirement lifestyles at different income levels. In February 2024, they updated their Retirement Living Standards to help savers visualise how much they may need.
A ‘minimum’ lifestyle - meets all your basic needs while leaving a little extra for enjoyment and social events. This could include taking a holiday within the UK, dining out once a month, and a few budget-friendly leisure activities. For a single retired person, it would cost £14,400 a year. For a retired couple, it would be £22,400 a year.
A ‘moderate’ lifestyle - offers greater financial stability and flexibility. You might enjoy one holiday abroad each year and dining out several times a month. For a single retired person, it would cost £31,300 a year. For a retired couple, it would be £43,100 a year.
A ‘comfortable’ lifestyle - provides the freedom to spend more spontaneously. This could mean indulging in regular beauty treatments and making home improvements. Plus enjoying multiple holidays a year. For a single retired person, it would cost £43,100 a year. For a retired couple, it would be £59,000 a year.
You may need to account for other costs, as the assumptions quoted here assume that you don’t have any other significant life expenses, such as care home costs.
Check if you’re on track for your retirement lifestyle
No matter the type of lifestyle you want to lead when you retire, your options will be limited by the size of your pension pot. The larger the pot, the more retirement income you’ll have. It can be hard to figure out how much you need to save for retirement, so we’ve built a handy online Pension Calculator that can make things a little clearer.
You can use our Pension Calculator to set a target retirement age and income. Just tell us the amount of money you’ve saved so far and your level of contributions. The calculator will then show you whether you’re on track to save enough to reach your target pension income. Or whether you may need to increase your contributions to help you get there.
How can you improve your pension balance?
Financial Journalist and Founder of the Much More With Less, Faith Archer says: “What you don’t want to do is wake up on your 67th birthday and suddenly go, “oh, my goodness, I haven’t saved anywhere near enough”. It’ll be a lot less painful if you can start many years earlier because those early contributions, signing up to a pension, staying auto-enrolled, not opting out at a young age, they’re the ones that have the most years to grow.”
Improving your pension balance is essential for a comfortable retirement, yet many struggle to prioritise future financial needs. A key step is to regularly review your pension charges. High fees can significantly erode savings over time, making it important to aim for annual charges below 1%.
Where your pension is invested also plays a significant role. For those years away from retirement, investing in higher-risk assets (such as company shares) could provide better returns. As retirement approaches, you could consider shifting towards lower-risk assets (such as bonds). This may help shield your savings from stock market fluctuations.
Finally, increasing contributions can boost your pension balance. It’s a good idea to regularly review your contribution levels, and to increase them if you can afford to, for example following a pay rise. Even small monthly sums can compound into a big pension pot by the time you retire.
To learn more, listen to episode 32 of The Pension Confident Podcast. You can also watch the episode on YouTube or read the transcript.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
