Pension engagement has garnered significant media attention as of late, with politicians and regulatory bodies taking notable steps to assist Brits in starting their pension savings journey at the earliest possible moment, such as extending auto-enrolment.

This drive among the Government and the private sector is of course welcome. Theoretically, beginning retirement savings at an early stage will only boost one’s financial standing upon reaching the desired retirement age.

However, saving is just one aspect of retirement planning; it is equally crucial for individuals to understand and actively engage with their pension.

In the UK, pension engagement is extremely low – and has been for some time. According to My Pension Expert’s research, just 38% of UK workers actually know how much is saved in their pension, while even fewer (33%) have a financial plan in place for retirement.

The significance of low pension engagement on the financial stability of savers cannot be overstated. Without a well-defined plan, Brits expose themselves to the risk of an inadequate income during retirement, potential delays in achieving their desired retirement age, and missed opportunities to enhance their retirement savings.

Pension contributions in a cost-of-living crisis

Considering the ongoing cost-of-living crisis, with the rising expenses of household bills, individuals may feel inclined to reduce their pension contributions to meet immediate financial needs. According to a 2022 Ipsos report, almost of fifth (17%) of those with workplace or private pensions had reduced or stopped pension contributions in the face of cost-of-living concerns.

While reducing contributions may offer temporary relief, it can have severe long-term consequences on retirement savings. Reducing pension contributions not only hampers the growth of a pension fund but also diminishes the various benefits savers can enjoy, such as employer contributions and pension tax relief, which would provide financial rewards later in life.

As a result, individuals may find themselves with a smaller pension pot than anticipated, making it harder to maintain their desired lifestyle during retirement. It is important to strike a balance between meeting current financial commitments and ensuring adequate contributions towards retirement to mitigate the impact of the cost-of-living crisis on long-term financial security.

Therefore, it is crucial for pension planners to actively engage with their pension. The good news is that it doesn’t have to be as intimidating as many perceive it to be.

There are a few straightforward steps individuals can take to enhance their financial well-being in the long run…

Exploring your pension

1) Assess your situation: A key step in retirement planning

When preparing for retirement, it is crucial to have a comprehensive understanding of your financial circumstances and the amount required to sustain your desired lifestyle during retirement. Unfortunately, a recent report by Unbiased revealed that 34% of Britons are unsure about how much they should save for their retirement.

To gain clarity, savers should evaluate all their assets, including personal savings and the total amount saved in  pension funds. Conducting a thorough audit will enable you to obtain a clearer understanding of whether you are making progress toward your retirement goals.

2) Reclaim lost pension pots

Managing multiple pension pots can be challenging, particularly for those who have changed jobs frequently throughout their careers. In the UK, an estimated £19.4bn worth of pension funds remain unclaimed.

While the Government is in the process of developing the pension dashboard programme to streamline pension tracking, the project has recently undergone several delays with no new timeline currently announced.

In the meantime, savers can make use of the Government’s pension tracker to locate any misplaced pensions. By simply knowing the name of your previous employer, pension holders can access the relevant contact information for their provider through the tracker. This enables you to get in touch with the appropriate provider and retrieve your pension information.

3) Regularly review your plan

Life is constantly changing, and it’s important to acknowledge that circumstances can evolve unexpectedly. This applies to retirement plans as well. To ensure your retirement strategy remains suitable and aligned with your goals, it is vital to review it regularly.

Savers should make it a priority to regularly assess pension plans. This proactive approach makes it easier to identify any necessary adjustments that may be needed to adapt to the wider economic situation.

4) Speak to an expert 

It is crucial that Brits feel supported as they look to better engage with their pension and complete the necessary steps towards achieving their desired retirement. Seeking independent financial advice is as an effective strategy in this pursuit.

Independent financial advisors play a vital role in helping savers actively engage with their retirement planning. They have the expertise to provide tailored advice to individuals, making them aware of pension products that best align with their unique financial situation and goals. By leveraging their insights, savers can develop a tailored strategy that maximises their potential for a successful retirement.

Failing to actively engage in retirement planning can potentially result in financial challenges down the road. For this reason, it is crucial that savers take full advantage of all available resources, including seeking independent advice from experts whenever feasible, in order to establish a strong retirement strategy that caters to their specific needs and objectives.

Lily Megson is policy director at My Pension Expert