Most people who are in work are eligible to join a workplace pension where your employer pays in money so long as you do.
From April 2019, you’ll see the amount your boss pays in go up from 2 to 3% so long as you pay 4%. In some cases you may have to pay 5% rather than 4% but that’s only if you don’t pay tax (you can read all about this here).
The point is this – there is a lot of free money floating about so you’d be foolish to miss out. The good news is that if you are between 22 and haven’t got to your state pension, you get to be auto-enrolled and find yourself in a workplace pension unless you opt-out. You have to join the pension scheme to opt-out so the chances are that you’ll be joining around ten pension schemes during your working lifetime.
The main exceptions to the rule are the self-employed who have to choose to join a pension. If you know what you are doing , there is a lot of choice for the self-employed who – being independently minded – often use self-invested personal pensions. A good example of a SIPP that offers good value for money is Pension Bee – you can join their pension on this page – or download a fuller guide than this blog provides
Another option for the self-employed is to join the Government workplace pension which is called NEST. If you are self-employed and want to look at doing this , here’s the link.
If you want to get help with your options , you may want to speak to a regulated financial adviser. Our view is that the best way to find a financial adviser is to talk with sensible people you know who use a financial adviser and take a personal recommendation. If you’d like to ask us about good advisers close to you, we’d be happy to help.
AgeWage thinks that using pension plans to save for retirement is a good idea. We will help you in whatever way you can, and we’ll make sure that you never have to do anything you don’t understand!
There’s a lot of argument amongst pension experts about what value for money actually means.
Here’s the provisional result of a poll we are doing on Facebook this week
We don’t think there should be any argument, the only “value for money” that counts is “value for my money”
So general statements about policyholder or members getting “value for money” are -non-specific and not that helpful.
So how does someone go about finding out the value they’ve got for their money? Pretty simple really!
The money is the amount of money that is paid into someone’s pension pot. So to tell you that , someone needs to know what you paid into the pot, when and what the pot’s worth now. The calculation’s known as an internal rate of return and is the value you’ve got for your money. Typically it will be in a range of 5-10% pa but it could be a lot higher or lower than that.
But that percentage doesn’t mean much unless you’ve got something to compare it with. You’ve got 6% value for money isn’t much good.
Now while i can imagine that a really clever mathematician could do a DIY internal rate of return, I defy anyone to fin out how well their money did against an average. That’s because no- one has (yet) come up with an average fund and even if they had, it would be fiendishly hard to work out what you’d have got if you’d invested in the average.
But if it were possible to create an average fund with a price for every day you invested , then it would be possible to compare how your did (your internal rate of return) with how the average person would have done , if they’d contributed the same amounts on the same days as you did.
Which brings us to the point in the conversation where AgeWage come in! What we do is take your contribution history and compare what it got you with what an average person would have got investing in the typical fund.
And to make things nice and simple, we turn the comparison into a score – we call the AgeWage score. The score is out of of 100 and the higher you score , the better you’ve done/
If you’ve beaten the average person you are “top half” and score 50+, if you’ve lost you score 50- and of course you could be average and score 50!
What’s the point?
You may ask yourself why these pension geeks are going to so much trouble to tell me how I’ve done?
If you’re one of the 94 people out of 100 who’s never gone into this , you are probably going to stay that way- but maybe not! Perhaps 5maybe another 10 or so people who found pensions too hard, will look at that AgeWage value for money score and say “you know what, I’d like to find out how they got to that score” or “perhaps I should get scores for my other pension pots” or “ if I compared all my scores” perhaps I could work out what to do next.
So the point is that some people (perhaps you) are bothered enough to use AgeWage scores as the setting out point for a deeper exploration of their pension pots.
And if we can get 5 or 10 more people in a hundred into thinking they can do pensions , then perhaps we’ll have moved the cheese a little bit words where is should be on the board!
If you were able to look back on your pension saving plan from your death bed (ugly thought), there would be two things that would matter;
How much you built up in your pension pot
How it met your financial needs in retirement
Most of us are somewhere between starting out and popping our clogs so we have to look forward and backwards.
Although we are always told that the past is no guide to the future, it’s a good start to work out how our pension has done against the average pension and this is something that the AgeWage score tells you. If you give us permission, we will find out how much value you’ve had for your money and compare that to the value you’d have got from a typical fund.
The AgeWage score will tell you how you’ve done in the past and AgeWage can help you understand the costs your paying for the management of your money.
But you’ll also need to know who is going to help you meet your financial needs in retirement. We’re keen to help you there too! We research pension providers and pick out those we think will help you in the future.
We look for pension providers that have a strong digital focus so that you can take advantage of the new technologies and get your money quickly and accurately.
We look for pension providers with strong personal support for you – the First Directs of pensions.
And we look for pension providers that offer strong stable funds capable of managing your money as you get your age wage.
The choice of who manages your pension fund in retirement may not involve investment at all. We will talk with you about guaranteeing your pension by buying an annuity and we can explain to you the pros and cons of cashing in your pension and managing your retirement finances from your bank account.
We hope that you’ll be able to use one of your existing providers going forward, continuity usually makes sense as it cuts down on the costs of moving money around, so if you work with AgeWage, you can be assured of a firm and frank conversation about your options that won’t be biased in any one direction.
There’s a lot of money missing! Some pension experts have reckoned there is £20,000,000,000 in unclaimed pension money in the UK. And the problem’s getting worse as every time we move jobs, we leave behind our workplace pension with our old employer. The DWP reckon there may be 50 million abandoned pension pots in 30 years time.
Remembering where we worked five years ago isn’t that hard, but trying to track down our employers from the seventies and eighties is a lot more tricky. Even if we can, it’s not easy to find out if we have any pension rights with them. If you joined a personal pension with the help of a financial adviser , you will have not just to remember the insurance company you used, but find out who owns that insurance company today.
Right now, there is limited help for you when you try to find your pension. Here are some useful websites to use
If you want to find out your rights to the state pension click here
If you want to track down a pension run by a company click here
If you want to find out who owns your personal pension insurer click here
Or you could wait for a pension dashboard
The Government is currently asking questions about how it should set up a pension finder service so that we can see all our pensions on a single pension dashboard. There are plenty of candidates who want to link all the pension schemes to a single screen using the new technologies we are getting used to.
Unfortunately, work to date has been very slow and if Government estimates are to be relied on – we won’t have a right to all our information through a dashboard till 2023 at the earliest.
Or you could talk with AgeWage
We want to provide AgeWage scores for all your pensions, not just for the pensions where the providers are digitally up to it. We will help you find your pensions so that we can work with your pension providers to get you AgeWage scores. And we will continue to work with Government to help them hurry up!
The money you spend on retirement buys you rights to money in the future. When you pay national insurance , some of your money buys you rights to a state pension – this is known as a defined benefit pension because you know what you’re getting. You may also have a right to a defined benefit pension from your employer.
But most of the money we’re spending on pensions today don’t buy us a right to a pension but a right to a share of a fund – known as “units”. These units have a price which changes every day. That’s because the fund is invested in companies, and properties or in loans and depend on what people are prepared to pay for them.
Generally investments go up and over time the investments that will go up most will be the investments that from day to day go up and down. Shares in companies are a good example of investments that are risky in the short term but provide value for your money over 10 or 20 years.
Most of us won’t choose where our money is invested, we’ll leave that to experts and use what they call the default fund. The default fund will change the way you are invested so your fund price becomes more stable as you get close to getting your money back. The people who choose the default funds you invest in have to explain themselves to regulators and increasingly to the people like you and me who are investing in funds.
Many people – especially younger people – want to know that the people who choose the funds and manage the funds chosen, choose responsible investments. We want the people who benefit from our savings to behave ethically, in the interests of the wider society and that they are well governed.
There’s a lot that can be said about what makes for a good or bad fund but one thing is for sure, the more you pay in charges, the harder it is for you to get value for your money.
AgeWage scores generally tell you how well your investments have done. We will help you to understand how much you are paying to have your pension pot managed and we we can help you understand whether your fund is managed responsibly.
We all know pensions are important, they’re the things that pay us a wage in retirement when we stop working.
But we know precious little about how they work and though we see large amounts of our salaries disappearing into them , we have little confidence about where the money is going, whether we’re getting value for our money or how we’re going to get our pension paid back to us.
There’s just so much to think about- investment, tax, timing and not least – the vexed question of how long we’re gong to need this “age wage”.
If we knew what we were doing and had answers to some of these questions, pensions could become things to look forward to , not just that pile of papers that lurks in the bottom drawer.
We need people we can trust!
The pensions we save into are looked after by people we can trust – they’re not called trustees for nothing. Sometimes the people charged with looking after our interests go under different names – like independent governance committees but it comes down to the same thing – the people we can and should trust – are looking after our pensions and generally doing a good job of it.
The trouble is that this message is not getting through to us – the general public. The pension experts are over there making statements about value for money that aren’t very relevant to people with busy lives. Ordinary people want people they can trust who talk to them in a simple and easy way.
That’s where AgeWage comes in
We want to help you with the things you find difficult so that pensions aren’t scary any more. Examples of the kind of things that people don’t understand include
what happens to my money when it goes to my pension?
am I getting value for the money I spend on retirement?
how do I join a pension?
what am I paying the people who manage my pension and how do I pay it?
how do I get to get my pension savings back?
how can I find lost pensions?
how to go about bringing all my pots together to get my money back?
this is the first of seven articles I’m writing between now and the end of March, all are about making pensions a little less scary. Helping people like these fine folk who we talked to recently in Central London.
If you’re used to reading the Vision of the Pension Plowman, you’ll know me- Henry Tapper. I’ve posted more than 3500 times in the last ten years.
That blog’s for pension people, but most people aren’t going to spend their time reading about pension stuff – unless it’s really meaningful to them and their finances.
So – to cut to the chase, I’ve started a new venture aimed at simplifying pensions. I’ve called it AgeWage, because that – in one word – is what a pension is – a wage in retirement that lasts as long as you do!
At the heart of AgeWage is a reckoning called the AgeWage score. It’s a single number between 1 and 100 we give to your pension pot to tell you the value you’ve got for the money you’ve paid in.
To get to the AgeWage score we need what’s called a “contribution history”. That’s a file of all the contributions you’ve ever made and what they bought at the time. If we compare your contributions and what they bought with the value of your pension pot today, we can see how much your contributions have increased by – we call this the internal rate of return (IRR).
We compare the AgeWage score with another fund – we call that other fund the benchmark fund- it’s one we’ve made up. What we actually do is to notionally invest your contributions into the benchmark fund and see what you would have got if you’d invested there instead.
Another word for the benchmark score is the “fifty score” , because the benchmark is supposed to be the average and fifty is the average between 1 and 100! If when we compare the IRR if you invested in the benchmark or fifty score, and it’s higher than what you got, you’ve not done as well as average, the opposite is also true.
This is what we mean by simplifying pensions. We think the first thing you want to know about your pension pot is how it’s doing and that’s what the AgeWage score does. It doesn’t hang about!
I’d like to draw your attention to an important study from Willis Towers Watson’s Thinking Ahead Insitute. It’s called shifts for the DC organisation of tomorrow. The study asks questions of pension providers around the world. It comes to one … Continue reading →
People’s answers may vary in detail, but the vast majority of us are motivated by a fear that our earnings will eventually tail off and that we will have to rely on our savings and income from the state or company pensions.
It’s worth understanding from the start that when you are saving into a pension pot, rather than to be granted an income for life, the job of turning the savings into an income is your job. You may not have volunteered for that job, but if you want a pension from your pension pot, it’s going to be down to you.
It’s no easy business turning a pot into a pension but it’s a lot easier if you are starting with one pot, rather than a number of them. Sadly, most of us will save into a large number of pension pots before we get to the point we want our money back, meaning that we face the choice in our fifties or sixties of trying to mix things up from a variety of pots, or biting the bullet and combining all the little pots into one great big pot.
Generally it is a good thing to have one big pot rather than a lot of little ones. Here are some arguments for bringing your pots together
It is a lot easier to manage an income from a single pot
Some pension providers (People’s Pension and Pension Bee will give you lower charges the more money you have with them)
Unlike bank accounts , there is no additional protection from FSCS for splitting your savings
Pensions are complicated enough without having to have lots of pension pots.
So in principal, most of us would like to bring our pensions together, but there are two nagging doubts that stop us
Might we be missing out or being penalised for transferring one pot into another
Which pot is the one I should be transferring out of and which should I use for the future.
As regards penalties and lost opportunities, we are told we should be taking advice, but where do we get that advice from, how much does it cost and is the cost of insuring I’m not being stupid worth it?
As regards which pot to use going forward, what’s my priority? Am I looking for my money to stay invested, do I want my money back now or do I want my money back in stages – or even over the rest of my life? There are lots of nuances too, how important is tax-effeciency to me, how important are guarantees and what do I want to leave to my family.
You soon realise that the choice of what you do with your collected savings depends on a lot more than how your savings have done in the past, though you probably want a view of how you’ve done in the past as a starting point.
How AgeWage helps
This is tricky stuff and we don’t want to frighten you into putting “pension consolidation” into the “too-hard” box.Nor do we want you rushing willy-nilly into consolidating into the first pension that takes your fancy.
Doing nothing could be better than impulse buying!
We can help you in three ways and coincidentally they spell out the AGE in AgeWage.
Assist – we can help you with your paperwork; you may have problems remembering where all your pension are. We can help you find them and once you have we can give you a simple way of getting the information on them you need to understand how they’ve done and how each pension pot provider can help you going forward.
There is probably a compelling case for choosing any of your pension pot providers to manage your retirement needs, but you’ve got to decide on the compelling case for you. We will help you to work out for yourself your later life priorities and then help you match these priorities with what’s on offer. We can’t tell you what to do, but we can show you where what you want and what’s on offer are closely matched.
Of course you may want to look a little further afield and consider a pension pot provider that hasn’t managed your money in the past.AgeWage has its favourites as you’d expect, providers of guaranteed pensions (Annuities),providers of drawdown policies and wealth managers who’s principal aim is to preserve your capital and pass it on to your heirs.
We’ll equip you to take the decision of whether to stick with one of the providers you already use, or a new provider, matched to your needs going forward. We will help you personally , using clever chatbots – or if you prefer, someone on the end of a telephone line, so you feel comfortable to take decisions for yourself.
Is AGE advice?
No – we’re not telling you what to do, we’re helping you , we’re guiding and equipping you, but in the end – the decision about whether and how to bring your money together in one place is your decision.
We’re very pessimistic about how long we’re going to live. Apparently we live on average seven years longer than we expect. While this is generally good news, it can cause problems in later life. The problem’s not going away – we’re living longer and that means we’re going to need to save more or work longer.
So how much should you be saving?
Well we can start with the minimum contributions that the Government require for you to be auto-enrolled. You’ll pay 4% of your wages between £5000 and £43,000 )with the Government topping up your savings by 25% (unless you don’t pay tax and are in a net pay scheme when that goes up to 5%).
If you don’t do percentages, if you’re on average wages, you’ll be paying in around £1000 pa into a pension (around £80 per month) and it will be costing you around £750 pa (about £60 pm ).
That’s your starter for ten, but how much you choose to save is up to you. We don’t want to see any AgeWage customers opting-out of free money – if you’re on average wages you’ll get as much again from your boss. But you may have some spare cash you want to top-up your pension with. You can do this by asking payroll to put up your contributions or put more money in as a lump sum.
Can AgeWage help?
Trying to accurately work out how much to pay in is very hard, especially if you are a youngster, there’s so much that can change – including your need for money in retirement, the investment return you actually get on your money and of course the spare cash you have when you are taking decisions.
But if you want a rough rule of thumb….
“Take the age you start your pension and halve it. Put this % of your pre-tax salary aside each year until you retire”.
Pensions are hard and scary, people need help understanding what they’ve saved into and help finding out how to invest and spend their retirement savings.
We are pensions experts who want to make pensions simpler for ordinary people by harnessing new technology and giving good guidance and advice.
What we are raising and why.
AgeWage is looking to raise £2m against a £3.5m valuation to become Britain’s pre-eminent pensions app and pension support service for the 94% of adults not paying for financial advice.
The money will allow us to complete the development of the AgeWage scoring system – a unique way of engaging people with the value of their pension pot.
It will enable to build a digital pensions advisory service giving people guidance and ultimately advice on how they can invest and then spend their pension pots.
It will enable us to participate in and benefit from the building of pension dashboards.
It will help make pensions as open as banking.
Why you are reading this blog!
This blog asks for your help; you can help us in one of three capacities
As a venture capitalist We are looking to raise money directly from the market as part of our current funding round
As an experienced investor I would like you to consider a direct investment into the EIS round which is open today and will close on 5th April to ensure investors can use their full EIS allowance this year. Please mail henry@agewage for a prospectus and application.
As a supporter of the aims of AgeWage, I would like you to support our crowd funding round which will open on Monday March 18th. From as little as £15 you can own equity in AgeWage under EIS. Look out for your invitation to join us on Seedrs.
You are invited to a seminar on AgeWage at Moorgate WeWork on March 18th (4pm – 6pm). Press this link to reserve your place
You can speak with AgeWage Founder Henry Tapper on 07785 377768 or mail him at email@example.com, message him on Facebook , twitter or linked in.
The AgeWage Investor Memorandum (including an application for shares is available on request). This is suitable for experienced investors.