Business

Have you seen your updated 'pensions dashboard'?

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DO you focus on the past and the present, and not think so much about the future?

One of the cleverest nuggets of wisdom in the financial services phrasebook is this: looking only back, and not ahead, is like driving your car looking only in the rear view mirror.

The Association of British Insurers (ABI) brought that up this week, when they highlighted how bad we are at knowing what our lives will be like, when we retire.

In the present, we all know what we are being paid for the work we do, but many of us have no idea how much we are going to have to live on when we stop.

In fact, in a survey of over 2,000 people, the ABI found that one in five of us have actually never checked on our pensions, we have no idea how much we have saved so far. Do you know how much you have saved into your pension, or how it has grown? Thought not.

The ABI are also concerned that we are losing track of our workplace pensions. People these days tend to have, on average, five jobs over their working life, which can mean five different pensions to keep track of, and we tend not to remember that small pension we had from that job we worked in for a few years in our 20s.

This is why there's so much talk these days about a “pensions dashboard.”

A pensions dashboard is an online interface, just like a website, that allows you to see all your lifetime pension savings in one place. The data is retrieved directly from your pension company or companies, and updated as you go.

The government have been talking about setting up a national one for years, but not much has happened yet, leaving the industry to say: “The long-planned platform, which would allow savers to see all their retirement pots in one place, should be the key priority for the government, according to three-quarters (71 per cent) of financial advisers polled by Standard Life.”

The idea of a government dashboard has been particularly under discussion since the introduction of auto-enrolment in 2012, which meant that if you are 22 or older and earning more than £10,000 a year in the UK, you are automatically enrolled into a pension scheme. If you are younger than 22, but are16 or over, you can opt to join as well.

One of the reasons why it is important to know what we will have to live on, is that we want to avoid what the EU calls “pensioner poverty”. Even if we are no longer an official member of the EU, their definition of poverty is still very useful. Brussels believe we are living in poverty if our income is less than 60 per cent of the average national wage.

Those fun guys at the Office for National Statistics tell us that the national wage at the moment, in real terms, is £474 per week. If you take 60 per cent of that, then you would be officially living in poverty today if your weekly income was less than £284.40.

The national average wage, of course, is likely to be considerably more by the time we come to retire.

The Pension Commission, on the other hand, have a different way of looking at it. They've got what they call a ‘Target Replacement Rate' (TRR), which is their view of how much an average earner should be aiming for in retirement. It's currently £19,162 a year.

Do you know how close you are going to get to those figures? If you don't, then you don't have the information you need to plan ahead. You might, for instance, decide to save more now.

:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 02871886005. Further information on Facebook at Kennedy Independent Financial Advice Ltd or at www.mkennedyfinancial.com

Would you like us to work out how much you will have to live on, when retirement day comes?

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