How do I know if I'm on track for a comfortable retirement with a DB pension?

Hi,

My husband and I are both in our 40s, have no children and we have both spent most of our careers in the public sector, so we both have DB police pensions and I also have a DB civil service pension. We do both have small (less than £15k) pension pots from brief forays into the private sector but we're not actively paying into these anymore. We own our house with a mortgage. We'd just like to speak to someone about what we currently have in place, what we could expect to receive and when, and what else we could/should be doing to plan for retirement (for example, re-starting paying into those private pensions). Obviously, I understand financial advisers make their money from funds under management, and we don't really have funds to manage, but we'd still like to understand if we're on track for a comfortable retirement or, if not, what we could do now to improve our prospects.

Thanks.

You can either take some steps yourself to work this all out. Or pay for some advice as you suggest.

The first thing you should do is get a rough sense of what you’ve got. Phone your DB (defined benefit) pension scheme and get them to tell you what you and your husband would get each year as pension income.

Then hop on to HMRC’s website and go through the Get a State Pension forecast tool. This will tell you what you’re in line for every year from your State Pension.

Add this to your DB pension for a running total.

£15,000 in a private pension won't move the dial much in terms of annual income, but it’s a handy lump sum to have for later life.

If you’d like some help to work out how much you might need in retirement, I suggest you use our quick and easy retirement calculator to get a sense of what you're on track for and to help identify any shortfalls.

Once you know the gap (between what you want and what you're in line for), then you can start to make a plan. With no expensive kids to cover costs for, you may be able to afford to chip away a bit a month into a private pension, although that of course will be locked away until you are in your late 50s.

If this doesn’t give you peace of mind, then look for someone to give you a one-off retirement planning session. For example, Charles Stanley offers a retirement MOT for £900 + VAT (called the One Step plan). There are other similar options around. Or ask a local financial adviser if they would do a one-off similar exercise and what they would charge.

Given you are in your 40s, I suspect the simple answer will be to work out what you have, work out the gap in income, and then to chip as much as you can afford into a private pension – the tax relief on pensions makes it a compelling way to save if you can afford to lock money away!

I use a simple rule of thumb about retirement income. I work out what the shortfall is in terms of an annual retirement income, and then multiply that by 22 to give me an indicative number of how much I need to save into a private pension.

So for example, if your DB pension plus the State Pension is £25,000 a year and you want £35,000 a year, that’s a shortfall of £10,000 a year. Which means you’d need roughly £220,000 in a private pension to top this up. Very roughly, but it gives you an idea.

It can get more technical in 10 years’ time as you approach retirement and need to start making some choices and navigating tax. Or pay the money today and get a more detailed, personalised and technical plan!