- Contact your pension providers and get a private pension forecast. If you’re not on target for an income you’ll be happy with, then look at what you can do to change it. Options include increasing contributions, retiring later and making changes to your existing arrangements. Because of a technical change to the Annual Allowance (aligning Pension Input Periods with the tax year), there may be scope to put more into a pension in 2016 than usual.
- Get a State Pension forecast. There are changes to the state pension happening this year so it is a good moment to look at what you can expect your National Insurance contributions to buy for you by clicking here. On April 6, 2016 the new State Pension launches. It's a welcome attempt to simplify the state pension and to distribute pay-outs more evenly however the Department of Work & Pensions has got itself into a bit of a pickle over communicating these changes. You can find out more about the changes here.
- Review your pension investment choices, especially if you have been auto-enrolled into a default fund. Most default funds will not be the best strategy for each individual.
- If you are eligible for a workplace pension and you haven’t already joined, then look at doing so; it is free money from your employer. In 2016, we'll see auto-enrolment step up a gear, with the steady flow of employers going through staging turning into something of a flood. We’ll also see the end of contracting out for final-salary pension schemes. This will result in increased National Insurance contributions for scheme members and could precipitate another round of scheme restructuring or closures. For employees this will mean an increase in their NI of 1.4 per cent on incomes between £8,060 and £42,380, the equivalent of up to an extra £40 a month in tax.
- Review your pension charges. Pension products have been constantly evolving; even if it was right for you when you started it, it may not be the best choice now. The government is looking at ways to make it easier and cheaper to move your pension.
- Check whether you’ll be affected by impending and potential tax changes. If you’re a higher earner it may well make sense to make additional pension funding ahead of the tax year end.
- Check whether you should use the Carry Forward rule to sweep up unused pension contribution allowance from previous years ahead of the pension tax review being published. You can find out more about the rule here.
- Make sure you’ve notified your pension provider about your wishes for any pension death benefit payments.
- Check whether you’ll be affected by the drop in the Lifetime Allowance. This will reduce from £1.25 million to £1 million and so could affect your capacity to make further pension contributions after April 2016.
- Look out for the forthcoming pension freedoms exit penalty review; it may present an opportunity to make a penalty free move from a dormant pension.
It's a fact: The Treasury and financial watchdog, the FCA are reviewing the 'advice gap' around taking benefits from a pension and are expected to report back for the Budget in March. This could free up access to low-cost simple advice and guidance to help people plan their finances.
Thanks to Tom McPhail at Hargreaves Lansdown.
- There are more money-saving tips in every issue of Yours magazine, out every fortnight on a Tuesday.