Understand your pension statement
You normally get one pension statement a year – your provider may call this your annual or yearly statement.
Your statement shows how much is in your pot and usually an estimate of how much you might get when you start taking money from it.
Knowing what’s in your pension statement will help when you come to book a free appointment with a Pension Wise guidance specialist.
Your statement should tell you your pension type – defined contribution or defined benefit. It may also show if your pension has any special features like a guaranteed annuity rate. It should also include your ‘selected retirement age’ (the age you agreed with your provider to retire).
The State Pension
You get a State Pension statement from the government.
Read more about what’s in your State Pension statement on GOV.UK.
What’s in your pot and your pension type
If your statement shows a ‘total plan’ or ‘fund value’, it’s likely you have a defined contribution pension. This means you can book a Pension Wise appointment and get personal guidance on what you can do with your pot. If it shows a pension value at retirement which is linked to your salary and length of service with an employer, your pension type is likely to be final salary or career average (defined benefit).
You can get help with final salary and career average pensions (defined benefit) at The Pensions Advisory Service
Your statement may use the words ‘scheme’, ‘plan’ or ‘policy’ – this is your provider’s way of describing your pension.
Your statement will also normally show the ‘transfer value’ of your pot. This is the amount you would get if you moved provider or cashed in your whole pot.
Your pension may have a ‘special feature’. This could mean a better deal, like a guaranteed annuity rate. It could also mean a restriction, like an early exit fee.
Special features aren’t always listed in pension statements. Contact your provider and ask if your pension has any special features or arrangements.
You may also find information on special features in the documents you got when you started the pension, or the documents sent by your provider around 4 to 6 months before your selected pension age (known as your ‘wake-up’ pack).
Guaranteed annuity rate
Look for ‘guaranteed annuity rate’ in your statement – especially if you started your pension during the 1980s or 1990s. This means your pension will pay a fixed rate of income. The amount would have been set when you started your pension and may offer better value than annuities available elsewhere.
This is not the same as a ‘guaranteed period’ annuity – one which stops paying at the end of a set term, eg 10 years.
Market value reductions or adjustments
If your statement shows your pension is invested in a ‘with-profits’ fund, it could mean it has a ‘market value reduction’ or ‘adjustment’. This means the amount in your pot is reduced in certain circumstances.
Early exit fees
Looking at the transfer value of your pot may help you work out if your pension has an ‘early exit fee’.
If the transfer value is the same as your pot value, it’s unlikely you’ll be charged a fee when you transfer. If the transfer value is lower than your total pot value, you may be charged an early exit fee.