75% of people don’t know what their pension is worth. Here’s why it matters

3 in 4 people can’t put a figure on their pension wealth. Here’s why you should know yours, and how this awareness could improve your retirement circumstances.

It is highly likely that your pension is one of the most valuable assets to your name. But are you aware of exactly how much your pension is worth?

According to a study from Standard Life, 3 in 4 UK adults cannot name the value of their pension pot. While you may know how crucial a role your pension wealth could play in your future, it could be that you have lost track of its value in recent years.

You could be wondering: “why does knowing the value of my pension matter exactly?” Of course, your pension’s value can go down as well as up, and past performance is not a reliable indicator of future performance.

Nevertheless, being aware of what your pension is worth before you retire is an essential step towards securing your financial situation during retirement.

Keep reading to find out why knowing the value of your pension(s) could make all the difference as you prepare for your later years.

You may have more or less pension wealth than you anticipated

As your pension is an invested asset, its value is likely to change year-on-year. While your pension would grow consistently in an ideal world, the market volatility seen throughout the pandemic and Ukraine war has reduced the value of some personal pension pots.

For instance, the Office for National Statistics (ONS) reports that between 31 March and 30 June 2022, the value of defined benefit and hybrid (DBH) and defined contribution (DC) pensions dropped by 6% overall.

If your pension experienced a similar dip in value, and you are planning to retire soon, it may be constructive to talk through your options with your Kellands financial planner. We can help ensure your pension is placed in favourable conditions where possible, and provide reassurance for the years ahead.

Crucially, if you have not seen your pension statement in the past 12 months, you may be overestimating the value of your pension – something that could have an impact on your financial viability down the line.

On a more positive note, you may also hold more pension wealth than you realise.

Indeed, according to the Association of British Insurers (ABI), the value of “lost” – meaning unclaimed or dormant – pension pots has risen by 37% since 2018, with their value now estimated to be £26.6 billion.

If you have had a number of different employers or have opened many different personal pension pots in your life, you could have unclaimed funds waiting to be used when you retire.

Fortunately, the government’s Pension Tracing Service can help you find any lost pensions, and your Kellands financial planner can help you factor these funds into your overall retirement plan.

Knowing the value of your pension can help you decide when to retire

The Standard Life study reveals that 79% of those aged between 45 and 64 cannot put a figure on their pension fund.

While the study asked people of various demographics about their pensions, it is important to note that for those in this age bracket, knowing the value of your pension could be of extraordinary benefit.

Indeed, understanding how much your pension is worth can help you answer one crucial question: “when can I retire?”

Knowing where your fund stands now, particularly after the market fluctuations experienced between 2020 and 2022, can inform your retirement choices in the next 10 years and beyond.

This information can help you assess how many years of retirement income you can afford to take from the fund, along with any other wealth you will draw upon later. Knowing this can help to give you a clearer picture of when you might be able to stop working.

Your pension is only one piece of your overall retirement income – so knowing how much it could contribute is vital

Along with using your pension to inform when you might be able to retire, understanding what your pension is worth can help you project your overall retirement income more accurately.

Indeed, your retirement income is likely to comprise a combination of the following sources:

  • Your personal pension, such as a self-invested personal pension (SIPP) or workplace pension
  • The State Pension
  • Any defined benefit (DB) pensions you hold
  • Individual Savings Accounts (ISAs), General Investment Accounts (GIAs), or other elements of your investment portfolio
  • Any inheritance you may receive
  • Income from properties you own, if applicable.

Among these, it is likely that the first on the list, your personal pension, will make up a large portion of your wealth in retirement. So, understanding what it’s worth can allow you to plan for a tax-efficient, multi-source retirement income both efficiently and accurately.

For instance, it could be that your other investments make up another large chunk of your wealth, and that you plan to use these to top up whatever you draw from your personal pension each year.

However, if your pension has seen substantial growth in the years leading up to your retirement, you may find that staying invested elsewhere, and solely living from your pension pot when you do retire, could be more beneficial for your wealth in the long term.

Alternatively, it might be more tax-efficient to leave your pension “until last” and use up other wealth in retirement first. This is because your pension will usually fall outside your estate for Inheritance Tax calculations.

These are just two of many possibilities that can be discussed with your Kellands financial planner in the run-up to retirement. Your circumstances are unique – but no matter who you are, or what your situation is right now, carefully monitoring the value of your pension in the coming years may be hugely beneficial to you.

Get in touch

For help calculating your total pension wealth (and making the most of it), email us at hale@kelland.co.uk, or call 0161 929 8838.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

Workplace pensions are regulated by The Pension Regulator.

< back to News & Views

News & Views

June 18, 2024

Do you have an Inheritance Tax strategy that works for your family?

Only 26% of high-net-worth individuals have an Inheritance Tax strategy in place. Do you? Read new insights into forming a tax plan that benefits your family.
Read more