Money Matters Margaret Dibben

Margaret Dibben: Money Matters

Writing in jargon is a ploy perfected by financial institutions to keep their customers in the dark. The pension freedoms we now have only make it more confusing, but late last year the Association of British Insurers (ABI) tried to help by publishing a guide called ‘Making Retirement Choices Clear’. It was prompted by a survey that found that the perplexing language pension providers use around pensions deterred people from thinking about their finances in retirement. We could have told them that for nothing.

The ABI reduced pension freedoms to six simple statements which you can find at www.abi.org.uk. So far so good, but it will not be compulsory for pension companies to use simpler words, and even those who do agree to write in plain English can take as long as they like updating their documents.

Then there are various other moves on the horizon that will help you understand your pensions and make suitable decisions about your retirement income.

One of the new pension freedoms allows you, from 55, to get your hands on your pension savings. This is a risky thing to do so young and not something to contemplate without taking financial advice. But advice costs money – hundreds of pounds – and you might not have that amount to spare until after you have taken cash out of your pension. Then it is too late to change your mind.

Starting in April, there will be a solution to this dilemma. The government is introducing a pensions advice allowance so that people, before they reach 55, can take £500 out of their pension fund to put towards the cost of getting financial advice about their retirement. The withdrawal is tax-free – which saves £200 for a higher-rate taxpayer and is on top of the 25 per cent tax-free lump sum available after the age of 55. Employees can also use £500 from their company pensions towards employer-funded advice, though not if they have a final-salary scheme (the sort where the eventual pension is tied to earnings).

These days it is not unusual for someone to retire with a dozen different pension pots spread around. A survey by Aviva found that one in eight people suspects they have at least one pension they have forgotten about, and it is estimated that there is £400 million languishing in pension savings waiting to be claimed.

To help you track down any lost pensions, last year the Department for Work and Pensions launched a new website for the Pension Tracing Service. Look at the website www.gov.uk/ find-pension-contact-details or telephone 0345 6002 537.

The government’s newest plan for helping us get to grips with our pensions is an online pensions dashboard – dashboard because, as with a car’s dashboard, you can see all the important information in front of you. In this case it will be all your pensions wherever they are, with up-to-the-minute valuations and state-pension forecasts.

Again it is not compulsory for pension providers to join, though many large insurance companies have already agreed to put their information on the dashboard, and the government could introduce regulations to force them all to take part.

A prototype will be available this spring, but the public will not be able to access the dashboard until 2019.