What’s A Pension Statement?

What's a pension fund?

This might be one of the most straightforward questions yet slightly complex to answer than you might think.

You’re standing stuck on a crowded commute. With the financial climate crippling the global economy, you’ve been finding yourself drifting thinking about your pension pot and the amount you’ve been saving into it.

Will you have enough for the later years which are bound to be way harder? Are you going to make it in retirement? Will your pension investment1 yield enough to ship you to Canada? The prospect of being able to be put out to pasture early is what keeps you going through your daily grind, but you’ve somewhat managed to lose track of how much you’ve saved so far.

Well, that’s where the pension pot statement comes in. The document allows you to keep track of the amount you’ve been investing in your pension fund. If you need to understand what it entails, here’s a detailed guide on what a pension statement2 is all about.

All You Need to Know About Pension Statements

As you get older, you need to start making better financial choices. These should be the kind of decisions that will allow you to sit back and enjoy your retirement. One of the things you may have done establish a pension plan.

Pension plans allow you to save for your retirement while also enjoying government tax relief on your contributions.  One of the things you should expect from your provider, apart from fantastic customer service, is a pension statement. 

So what’s a pension statement, what does it say, and why should you pay attention to it?

Well, a pension statement is a document sent to you by your provider annually, telling you about the state of your account. The pension fund statement breaks down the amount of money you have, where your cash has been invested and also what kind of pension plan you have.

Additionally, it’ll have details like the agreed-upon retirement age, and how much money you would get if you decided to cash your pension that year.

Personal and Workplace Pension Statements

Most workplace and personal pension plans are defined contribution pension schemes – meaning you’re responsible for saving into your pension fund and that its value is dependent on your contributions and how your investments perform. Therefore, with these pension schemes, your pension plan statement will show the fund value and highlight the performance of your assets.

If you, however, have the defined benefits pension scheme that’s based on your income and period you’ve worked for your boss, your pension statement will indicate your pension value at retirement and the length of service.

State Pension Statements

If you’ve resided and worked in the UK, you might be eligible for the State Pension, in addition to other pension plans you have. The amount of capital you can get from the government will depend on your National Insurance Record3 and the number of years of National Insurance Contributions you’ve made. To be deemed as eligible you’ll have to have paid National Insurance for at least ten years and be aged 35 years and above.

So, with this form of the pension plan, the pension statement will offer you an estimate of the amount you’d get when you reach the State Pension Age. It’s also possible to check your State Pension statement online through the government State Pension Forecasting Tool4.

The Importance of Pension Statements

It Breakdowns the Money and Benefits of Your Plan

If you’ve been making contributions to your pension every month for a few years, you could quickly lose track of how much money you have put in. It’s incredibly possible when you include other factors like the tax back top-ups from the government and potential contributions by your employer. The annual statement tells you exactly how much if in your pot. It’s also an ideal way to track your investments if you don’t have a Self-Invested Personal Pension (SIPP) plan.

It Points Out Any Special Features Associated With Your Plan

Most people don’t read the fine print before signing documents, which might mean that there are some unique features you might not have known are part of your pension plan. That information will be present in the pension statement.

For example, by going through this document, you might find out about early exit fees or special features. These are particularly important to be mindful about before considering moving or cashing in your pension plan. A Special Feature could be the guaranteed annuity5 rate you’ll benefit from when you retire, and the early exit fees could be a restriction that’ll become due as soon as you transfer your pension fund.

If the pension statement doesn’t, however, give you any details on the special features, then you need to be sure to check in with your plan provider.

If you have different pension plans, the pension statements will come in handy as they help you assess each policy individually. You’ll also get the information you might need to determine whether you would prefer to hold the different funds or combine them.

Having a pension plan with the right provider is one of the best retirement presents you can give yourself. Additionally, regularly checking your statements allows you to know how your pension pot is doing, and therefore, better plan for your retirement.

Common Questions

What’s A Pension Benefit Statement?
Should You Get An Annual Pension Statement?
How Does One Get Their State Pension Statement?
How Do You Get Your Pension Statement Online?

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