When you take out a pension, many people do not consider what happens when their circumstances change. However, many changes can occur during your working life that can affect the growth of your pension. In this article, it will explain the common issues that you may face in terms of your retirement fund and how to solve them when they do. This will allow you to be ready when the worst happens, and ensure that your pension is protected at all times.
- Reducing Work Hours
Whether you are coming up for retirement or have just had a child, many people look at reducing their work hours at some point in their lives. However, many people believe that cutting their work hours can have negative effects on their pension, especially if they decide to go part-time. Working part-time can cause issues with your pension pot in terms of how much money you and your employer are contributing to it, as you will be earning less. Then, you should consider making voluntary payments. However, a pension must still be offered to you by your employer, meaning that you will have a small pension regardless of how many hours you work as long as you do not choose to opt out.
One of the most significant changes that can happen during employment is that you can be made redundant. This can cause issues with your pension as you will not be paying into it anymore. If you are made redundant, you should take immediate action with one of the many options available to you. You can leave your pension where it is and continue to pay into your workplace pension, or you can transfer this to a new scheme whenever you want. However, you may also face issues when it comes to knowing what to do with your redundancy pay. If this is the case, you can pay into your pension with your redundancy pay as a voluntary payment. If you feel that you are financially able to do so, you can also split your redundancy pay so that your employer pays some of what would have been an immediate source of money into your pension as an employer contribution. Although this ‘redundancy sacrifice’ may cause problems in terms of your immediate finances, it ensures that you will have enough funding for the future.
Bankruptcy can cause a lot of issues in your life, not least in terms of your pension. If you file for bankruptcy, this can cause changes to your retirement fund that you cannot avoid, and you must ensure that you are aware of these. If you have filed for bankruptcy before May 29th, 2000, the government will have taken your assets, including your pension, and given these to your Trustee to pay off your creditors. However, if you have filed after May 29th, 2000, then your Trustee would have been able to protect your claims. They will only be able to remove excessive funds through a court process if unusually high amounts have been donated before bankruptcy, and you will only be able to access these for a limited time through an agreement. Knowing this can help you to prepare for the financial future.
If you would like to learn more about your pension, you can chat to Portafina advisors on their social media like Facebook, LinkedIn, YouTube and Twitter. However, if this article has inspired you to chase a career in finance yourself, have you ever thought about a career as a financial advisor? Visit Portafina’s Job site to find out if it would be the right job for you.