I’m going to be 50 next year, and so far, I have saved about £18,000 in a workplace pension. I have been automatically enrolled since 2016.

My question is should I stick with it and get a SIPP pension as well? Or should I just put more in the workplace one until retirement?

I hadn’t really thought about a pension until I hit 50.

Fran

Rachel Vahey, AJ Bell Head of Public Policy, says:

Generally, for those who are members of a workplace pension scheme, staying in that scheme is likely to be sensible. They will get the extra bonus of their employer’s pension contributions, as well as upfront tax relief. And the combination of these can mean it’s much easier to build up a pension pot. (As you have already discovered.)

Beyond that individuals need to think about whether pension saving is their priority for spare cash. Most people want to get an emergency pot sorted first, then think longer-term towards things like pensions and investment ISAs.

If pension saving is the priority, then consider whether to top up contributions to the workplace pension or contribute to another pension, such as a SIPP. (Most workplace pension savers should be able to easily top up their pension account.)

There are a few things a pension saver should think about when making this decision. Such as: costs and charges, and how these compare between the two options. But also, how easy is it to manage these pensions. Having to track two pensions with two different providers requiring two logins etc. involves a bit of extra hassle. But on the other hand, the other pension provider may offer a different experience – for example more information or smoother administration. Having a different pension account could also mean having different options – for example on investment choices or how to take pension money.

A WAKE-UP CALL

When pension savers get to age 50, they get a document from the pension provider that gives a summary of the pension – a wake-up pack. It is designed to prompt people to think about how they want to take their pension money. (The minimum age someone can receive pension pot funds is age 55 – rising to age 57 from 2028.) This could include how to generate an income when that time comes and the retirement lifestyle they want. This all feeds into how much someone could contribute in the run up to retirement and how much investment risk they might take.

These can be difficult decisions. There is help though. The Pensions and Lifetime Savings Association have published a set of ‘retirement living standards’ which can help people picture what kind of lifestyle they could have in retirement, and how much money they may need to get this. 

The government also offer a free, impartial guidance service – Moneyhelper. The guides can be very helpful in figuring out what questions to ask about pension savings, and what people need to think about.

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