Controlling the Controllables

Now I could start this blog off by bemoaning the loss of yet another Secretary of State for Work and Pensions (since you ask, we’re on our 6th incumbent since the Brexit Referendum in 2016) and what kind of message this sends to the population about the importance of pensions to the Government. I could also have cracked a joke about which lasts longer – said Secretary of State or a wine gum – but, frankly, they’re just easy targets so I’ll pass over them for now.

What I want to talk about in this blog is what’s under your control in your pension because what you can control is going to have a significant impact on your income and, hence, quality of life, once you make the decision that work is no longer for you.

So, what are the main contributors that will affect how much you will have in your pension come that day? Broadly, there are four: –

  • Your contribution
  • Your employer’s contribution
  • Investment returns
  • Charges

In time honoured fashion, let’s look at these in reverse order.

Charges – for most people, their pension is going to be through their employer who will have set up an appropriate pension arrangement from the date legislation first applied to them (their Staging Date). The terms of this plan, and particularly the charges, will have been set at this time and, despite confident predictions that there would be a flourishing secondary market where employers move their pension to obtain better terms, this has not happened. Employers are reticent to move their workplace pension provider, except in extreme circumstances. And, in any event, Government has capped charges so there is not that great a range over which charges can vary. Conclusion – uncontrollable.

Investment returns – most employees (greater than 95%) use the default investment fund or strategy in their workplace pension. While nearly all employees have the option to use alternative funds, a combination of apathy, lack of understanding and fear of getting it wrong, mean very few do. Looking at most workplace pensions today, there is little difference in how money in the default fund is invested – it’s almost always 75% in stock markets (both here and abroad) and 25% in more cautious areas. And when all is said and done, the returns are what the returns are. There is almost nothing an individual can do to influence those returns. We just hope they remain generally positive over the medium to long term. Conclusion – largely uncontrollable.

Employer contributions – the Government legislates on minimum contribution rates. A good proportion of employers pay more than the minimum required but many do just what they need to. Employer finances, like personal finances, are not unlimited and budgets tend to work several years in advance. So, moan as much as we like, we get what our employer gives us, and it is other pressures that are far more likely to influence this. Conclusion – uncontrollable.

Personal contributions – hopefully you will have spotted the logic of my argument already and know that this is the controllable bit! I have already admitted that personal finances are not unlimited, and I am not, for one minute, suggesting that we should throw all our disposable income and unallocated savings into our pensions. That would be folly. But, if we are honest, are we putting as much as we could into our pension? Many people pay the minimum under the misguided impression that this is somehow a recommended amount. Others pay the minimum simply because they don’t know they can pay more. And the rest don’t pay more because they simply haven’t investigated their projected retirement finances and what they do with their money today. Paying an additional 1% or 2% now may cause a bit of minor pain for a month or two but the impact on future finances – particularly for the young – can be substantial. Conclusion – controllable (but you knew that already).

So, go on. Register for your pension provider’s online services and get a forecast of what your pension is likely to give you based on your current contributions. Check out your State Pension too (Google “State Pension Forecast” and go to the site about three down the results list). And have a look at your spending now to see if that 1% or 2% is really going to make that much of a difference – my guess is it won’t.

It will be worth it in the end – honest!!

For advice on getting the most out of your pension, contact or call us on 0333 241 3350.

Peter Murphy DipPFS



This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case. Investments may fall as well as rise and you may not get back the full amount