Are you aged 50 or over with a pension plan? If so, you’ll start to notice an increase in the amount of paper that your provider sends you. They’re called Wake up Packs.
The FCA decided that the packs sent out to people in the 6 months run up to their retirement age was not enough.
They were prompted in the main by the concern about the pension freedoms. These were brought in from 2015, giving people greater control over their pension funds from age 55.
They’re worried that people are making poor choices and have raised fears that this could result in them running out of money in their old age.
So the newly revamped and shortened ‘wake up packs’ were brought in for those who have pensions with insurance companies and other providers. But not defined benefit scheme members.
Pension providers have been sending out retirement packs to customers a few months before they are due to retire. But the FCA had concerns that these were often long and wording and aren’t always easy to understand.
The new wake up packs are designed to prompt people aged 50 to start thinking about their plans for retirement. The FCA has set out strict guidelines on what needs to be included. They want to ensure the packs are succinct and easy to read and understand.
The wake up pack information included will be:
Tax free cash: examples of what you’d have it you take out the maximum 25% tax free cash, and if you take no tax free cash.
Income Withdrawal amount: the pension provider will tell you how much it’s assuming you’ll withdraw as pension income. This uses figures from the FCA (Financial Conduct Authority).
Fund Value: this will tell you how much you’ll have left in your pension fund after 5 years and 10 years. And also, how old you’ll be when you run out of money. It’ll assume that your fund continues to grow at 2.5% above inflation during this time.
Charges: your annual charge will be set out as well as how much this will reduce the growth in your pension fund. You’ll also be told how much you’ll actually pay incharges in the first year.
From 1st November 2019, if you’re 50 or over you’ll receive a wake up pack from every company you have a pension fund with. So you could end up with quite a few of these!
This is a great opportunity to review your existing pension funds. Check that they’re all competitive and performing well, and start working on your retirement plan.
For more information on old pension plans check this out: Should I Restart Pension Contributions into an old Plan?