How to find out what your pension is worth

If you pay into a personal pension, you’ll have steadily built up a pot of money for retirement.

Although you should be getting regular updates on how much you’ve accumulated, it can be harder to know how much you’ll actually receive when you finish work.

So how can you get an idea of what your pension is worth?

• Find your pension plan information
• Types of pension plan
• Pension plan rules and regulations
• Types of pension income
• How can I estimate my retirement income?
• Pension valuation calculators

Find your pension plan information

It is relatively easy to find details of any pension you are currently paying into. You should get regular updates from the scheme which will normally indicate what you can expect to get in retirement.

However, you’re likely to have had several private pensions over the years. If you have mislaid the paperwork, or a pension provider has been taken over or merged with another, you can use the government’s Pension Tracing Service. This service won’t confirm whether or not you have a pension with a company or what it’s worth, but it will help you track down any relevant contact details. You can then contact the provider and find out if you have a pension with them.

It might be worth consolidating your pensions if you do have multiple with different providers.

Types of pension plan

There are two main types of private pension – money-purchase (also called a defined-contribution pension) and defined-benefit (also known as final-salary).

A defined-contribution scheme invests the money you pay in, and the pot of money that builds up during your working life is used to provide income for you in retirement. A number of factors that can influence how much you’ll have for retirement – mainly the degree of risk that you are happy for your pension provider to take with your investments, and the length of time it is invested for.

A defined-benefit scheme guarantees a certain amount of income at retirement based on your salary and how long you’ve worked for your employer.

Not all personal pensions are the same. A Stakeholder Pension has capped charges, although you often have a very restricted range of investment options available to you. Although charges are capped, the majority of Personal Pensions now have lower charges.

On the other hand, a Self-Invested Personal Pension (SIPP) gives you control over your investments. You can manage it yourself, through a financial planner, or give instructions to a manager on where you want your savings to go.

Although there are no guarantees, any money you pay into your pension early in your working life will have several decades to grow – so the earlier you start to save, the more chance you have of building up a healthy retirement fund.

Pension plan rules and regulations

The rules around pensions can change and are subject to current tax laws. If you have multiple pensions, are a high earner, or just want to understand what you have and where you are heading, it’s worth speaking to an independent financial adviser to find the best option for you.

Although contributions that you make to your pension pot benefit from tax relief, any regular pension income you take in retirement is subject to income tax.

There is also a tax-free allowance – you’re usually allowed to take up to 25% of your pension pot as a tax-free lump sum. If you don’t have a need for a large lump sum, many providers now offer the option of taking the tax-free sum split up on a monthly basis which can help to top up any income you take.

Types of pension income

You’ll have several options when you decide how to take your pension, and you should take independent financial advice. Some of the options available to you can’t be changed once you’ve made your decision and you start to access your retirement income. For example, you normally can’t change your mind once you have purchased an annuity.

Some of the options are:

• Using some or all of your pension to buy an annuity, provides an income for a defined period or the rest of your life. This can be a fixed amount or index-linked, meaning it will increase with inflation through your retirement. You can also incorporate a spouses or dependants pension as well.

• Making occasional withdrawals from your pension fund as and when you need them, which is known as drawdown. The remaining money in your fund will have the potential to continue growing.
• Taking some or all of your pension fund as a lump sum. You can withdraw up to 25% of your pension pot tax-free (subject to the lifetime allowance), but any further withdrawals will be subject to tax.

How can I estimate my retirement income?

The first thing to do is to check your state pension and find out if you’re on course to receive the full amount. You can do this via the HMRC website.

Then check the most recent correspondence you have received from your pension providers, using the government’s Pension Tracing Service to get their details if necessary. That should give you an indication of what you might expect from each pension scheme, even if it’s just a best estimate.

You can speak to an independent financial adviser to gain an understanding of where you are now and where you are heading.

How much pension should I have by 40?

There is no one-size-fits-all answer to this. It will vary from person to person and will depend on how much you will need to fund the lifestyle you want in retirement and when you plan to retire.

If you have a money-purchase pension, the performance of your investments between now and when you retire will have an impact on the size of your pension pot.

Regardless of the type of pension you have, the effects of inflation mean it can be hard to know exactly how much you’ll need in order to meet your expectations.

But in rough terms, if you’re on target to receive a full state pension and you expect to work until the statutory retirement age, building up a personal pension pot of about £200,000 means you might expect to receive a total income of between £20,000 and £25,000 a year (including the full state pension allowance).

If you pay into a pension throughout your working life, building up about £70,000 by the time you are 40 you have a greater chance of hitting that £200,000 target by retirement, although this is not guaranteed.

However, if you haven’t hit that figure or if you haven’t been saving since you started working it’s never too late to start a pension.

How much is an average pension worth?

There isn’t really such a thing as an “average” pension.

But the Pensions and Lifetime Savings Association has published research that looks at how many people are on target to reach one of three levels of retirement income, which it has termed “comfortable”, “moderate” and “minimum”.

In early 2023, it used the figure of £37,300 for a single person (£54,500 for a couple) as the definition of a “comfortable” annual retirement income; £23,300 (£34,000) for a “moderate” annual retirement income; and £12,800 (£19,900) for a “minimum” retirement income.

According to the study, which was carried out by researchers at Loughborough University, only 30% of the population are on target to receive a moderate retirement income, and just 9% are likely to enjoy a financially comfortable retirement.

Pension valuation calculators

To get an indication of how much you should be saving to meet your pension targets, you can use a pension calculator.

This will give an illustration of what you might receive during retirement, as well as show how you can boost your prospects if you want to build a bigger pot.

Talk to our experts

It can be tempting to leave planning for retirement until you get older, but that can mean you don’t start saving early enough. There is even the option for parents to take out a pension for their children, ensuring they start saving at the very earliest opportunity.

About 30% of UK adults aren’t saving for retirement at all. And even if you qualify for a full state pension, it’s far below what most people would hope to retire on.

If you haven’t begun saving yet, or if you’re worried that you’re not saving enough, an independent financial planner can help you make sense of what might seem a daunting subject and can help you identify your goals for later life and work out how much you need to retire.

If you’d like to find out more about retirement planning, get in touch with one of our experienced independent financial planning experts at 01603 967967.

Please note, the value of investments and any income from them can go down as well as up and you might not get back the original amount invested. The past is not a guide to the future.

Tax benefits depend on your individual circumstances and the laws concerning these can change.