When life-changing events occur, your pension is probably not the first thing that springs to mind. Especially in really difficult times, such as going through a divorce or being made redundant. Often, though, it is these types of events that could have a significant impact on your pension savings, both good and bad.
So, let’s have a quick look at some of those big life events and how they could affect your pension.
What happens to your pension…
…when you die
Not something most of us want to spend too much time thinking about. And yet, depending on what type of scheme you have, there are several things that could happen to your pension when you die. You might be able to pass on any remaining money to family, friends and even charities. Or, there could be restrictions around what you can do. Getting a clear picture of what you can and can’t do with your pension, sooner rather than later, puts you in a much stronger position when it comes to making financial plans for your future.
…if you move abroad
It’s estimated that between 4.5 and 5.5 million Brits live abroad1. A clear indicator that moving away from the motherland is a popular option, especially as people reach the promised land of retirement. And while the change of scenery can do wonders for your spirit, it can cause challenges for you and your pension. From accessing your pension while living abroad to whether you will still quality for tax relief.
If you are made redundant
When it comes to redundancy and your workplace pension, you have a number of options. The first thing to stress is: your workplace pension will still exist. You can choose to keep it where it is and in many cases you can continue to contribute to your scheme, although you’ll no longer receive employer contributions. Or, it might make more financial sense to transfer your workplace pension to an existing or new scheme. This might be with a future, new employer or through a different, stand-alone personal pension.
…if you are made bankrupt
The silver lining is, your pension savings are not classed as an asset if you are declared bankrupt. This means that, generally, the appointed receiver cannot seize this portion of your money. However, there are lots of rules and regulations that apply to your pension, and how you can save into and access it, if you enter bankruptcy. So, if you are declared bankrupt, knowing exactly where you stand with your pension could be the difference between further financial challenges and a much-needed element of security.
…if you become ill
This all depends on the type of pension you have and the rules around it. Generally, you cannot access your pension savings before you reach 55. Although, if you become seriously ill some schemes will allow you to access part or all your pension before this age. The one absolute no-go is the State Pension, which you cannot access before a specific age. This age is currently the same for both men and women and is due to rise steadily over the next 20 years.
…when you start a new job
If you are 22 or over and your new job comes with a salary of £10,000 or more, your new employer must automatically enrol you in a workplace pension scheme. Both you and your employer pay in and the minimum total contribution from April 2019 is 8%. In some cases, you might be able to transfer into this new scheme any other pension pots you have. Whether or not this is the right decision for you depends on the terms and rules of your existing and new workplace schemes.
…if you get divorced
If you are married or in a civil partnership, then your pension should be included as part of any financial settlement in the event of a divorce. Thankfully, there is a lot of flexibility when it comes to how your pension is shared out as part of any settlement. There are a number of options including pension sharing or pension offsetting, where the value of the pension is offset against other assets.