Thursday 18 January 2018

Don't get sucked into a scary pension black hole

Whether you're already paying into a pension or will soon have to, make sure it won't leave you high and dry when you retire, writes Louise McBride

IT'S only a matter of time before many of us will have to retire at 68 instead of 65 -- while many others will have to pay into a pension for the first time.

Last week, the Government revealed plans to increase the retirement age to 68 by 2028 and to introduce a compulsory pension for certain workers who are not currently paying into a pension.

Whether you're one of the hundreds of thousands of workers who could be forced to pay into a pension soon -- or one of the million already doing so -- do whatever you can to ensure your pension is up to scratch. Otherwise, you could be in for a shock when you retire.

Basically, there are two types of pension scheme -- defined contribution and defined benefit.

With defined contribution, the pension you get at retirement depends on how much you (and your employer if he chooses to do so) have paid into the scheme -- and how well that money has been invested.

With defined benefit schemes, you usually get a percentage of your salary when you retire. However, as many defined benefit schemes are in financial difficulty, a lot of members are only getting a fraction of the pension they expected -- indeed, some people have even lost their entire pension.

If you're a member of a defined benefit scheme, make sure you know whether or not it has any shortfall -- and if there are any plans to wind up the scheme. "Members of pension schemes are entitled to see a copy of the scheme's annual report and accounts. Ask to see this," said Peter Griffin, director of pension firm Allied Pension Trustees.

"The annual report will include a copy of the latest actuarial valuation, which sets out the funding position of the scheme. The actuary also completes an annual funding certificate which advises whether there have been any detrimental changes in the funding position of the scheme since the last valuation was completed."

Regardless of the type of pension scheme you're in, can you expect a better pension in retirement if you're one of those who will have to work beyond the age of 65? What kind of a pension might you get if the retirement age was eventually increased to 70 instead of 68? And could you find yourself short of cash in retirement even if you've belonged to a pension scheme for 20 or 30 years? We lined up some experts to do the maths.

Sunday Independent

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