A financial expert has warned that savers could lose huge sums if they do not carry out quick checks. (Image: Getty)
Britons are being warned they could lose hundreds of thousands of pounds from their pension funds if they don’t carry out six quick checks that will take less than five minutes in total.
Ahead of Pension Week, which begins on Monday (September 14), financial expert Antonia Medlicott has warned savers that poor fund performance, rising fees and lost pots are seriously undermining the performance of standard pension funds. The founder and managing director of Investing Insiders said taking six 30-second reviews could add more than £250,000 to a pension fund by the time a saver stops working.
Below are six quick steps Ms. Medlicott recommends to secure your retirement.
Brits are urged to log into their online pension accounts to identify the specific names of their funds and view their investments. (Image: Getty)
1. Find your fund
Logging into your online pension account or provider app allows you to identify the specific fund in which your money is invested. Make a note of the specific name of the fund that is different from the name of the provider, or contact your provider directly if it is not clearly stated.
2. Check your five-year total income.
Search your fund name using the online Pension Performance Checker to compare it to similar funds over a five-year period. Research by Investing Insiders found that, based on a pot of £20,000, the worst-performing fund over five years fell to just £282, while the best-performing fund achieved a total return of 180.28%, taking the pot to more than £56,000.
While past performance is no guarantee of future results, long-term underperformance against benchmarks could rob you of thousands from your final pot.
3. Check your risk level
Funds vary in risk level depending on whether they hold a larger proportion of stocks (higher risk) or bonds and cash (lower risk).
Young investors placed in overly cautious, low-risk funds risk losing real value due to inflation. Conversely, those approaching retirement age should avoid high-risk funds that leave them vulnerable to sudden market declines. Beware of workplace pension funds that automatically de-risk, as de-risking too early could cause you to miss out on vital years of growth if you plan to take income over time.
It is estimated that 3.3 million pension pots have been lost in the UK, worth a total of £31.1 billion. (Image: Getty)
4. Find out the cost
Check the current expenses automatically deducted from your bank. If the fee is more than 0.75%, ask your provider if cheaper funds are available under the scheme.
A charge difference of just half a percent will significantly degrade the value of your pan over several decades.
5. Find your lost pension
It is estimated that 3.3 million pension pots have been lost in the UK, worth a total of £31.1 billion. Use free online pension search tools to find missing pots from previous jobs and contact former suppliers. While consolidating multiple banks may reduce administrative costs and fees, consult with a financial advisor first to avoid losing valuable benefits.
6. Check if you have enough money for retirement.
The average UK pensioner seeking a frugal lifestyle needs approximately £32,700 a year. For a full state pension providing more than £11,500, a private or work fund must cover the remaining difference of more than £20,000 a year.
Savers can check their goals using an online retirement calculator to see if they are on track. Increasing your contributions by just 1% of your salary could result in tens of thousands of extra pounds over 20 years or more.
Ms Medlicott stressed that time and compounded growth remain savers’ biggest assets.
She said: “Too many people think they are fine but could be missing out on huge sums due to high fees or poor fund performance. Retirement can easily last three or four decades, and if that seems a long way off, remember that it’s what you do today that matters.
“Someone who makes all those checks and invests £2,700 a year in their pension could add an extra £257,000 to their pot after 37 years, and that could be due to a small percentage change in fees and staying in the best-performing fund with your provider.”