Update your retirement age or miss out on £10,000
Most people will have set their planned retirement date when they first set up their workplace pension.
However, recent changes to the state pension age, as well as the removal of the default retirement age, means people can now work for as long as they want or need.
Insurance firm Aviva warns there could be serious consequences if someone planning to retire later in life fails to notify their pension provider.
Analysis by the insurer shows that an average earner in an automatic enrolment scheme could miss out on more than £4,000 in their pension pot by sticking with a default retirement age of 65 when they intend to retire at 68.
Someone whose retirement age is still set at 60 could miss out on almost £10,000.
Women are most likely to be affected due to the way default retirement ages were set in the past.
The reason this happens is because of something called ‘de-risking’.
As people get closer to their retirement date, their pension investments are typically switched from riskier to safer funds.
If the retirement date on your records is too young, your provider will move your savings to less risky assets too early, which means you could lose out on investment growth when your pension pot is the largest.
Equally, if your provider holds a retirement age that is too old, it will keep your money invested in riskier investments for too long. If investments lose value too close to the planned retirement age there may not be time to recover their value, which means less money, or perhaps a last-minute delay to retirement plans.
Colin Williams, managing director of workplace savings & retirement at Aviva, said: “De-risking profiles have been carefully designed to balance risk and return in the approach to retirement. But this balance is thrown out of kilter if someone wants to retire at a different age than was originally assumed when they started their pension.
“Changing your retirement age is a really simple way to maximise the potential returns of your pension investments. Plus, it’s an opportunity to check how much is in your fund and if you’re on course to achieve the type of retirement you want.
“Many providers allow you to check and change your retirement age online. I’d encourage people to go online and check the retirement age their provider holds, and if doesn’t match their current plans, change it.”