‘Am I paying too much in pension charges – and what’s a ‘good’ return?’

‘How does tax relief work?’

This depends on the type of pension scheme you are in.

Broadly, you get tax relief on pension contributions that is equal to the highest rate of income tax you pay. It basically means if you put money into a pension instead of taking it as income now, you don’t pay the tax on it that you would have paid if you had kept it as income. 

The current rates of income tax are 20pc basic-rate, 40pc higher-rate and 45pc additional-rate in England. It means a basic-rate taxpayer pays in £80 to their pension, and tax relief turns this contribution into £100. 

The way it is applied depends on what type of pension scheme you are paying into. “Net pay” workplace schemes will add all your tax relief to your pension contribution for you, regardless of the rate of tax you pay.

However, if you pay into a “relief at source” scheme, which is the type that normally applies to self-invested personal pensions (Sipps), only the basic amount of tax relief is added for you by your pension provider.

Any extra tax relief you are owed as a higher or additional rate taxpayer must be claimed yourself via a self-assessment tax return or by contacting HMRC.

‘How do I move my pension and what pension providers are there?’

First, you need to check that moving a pension is a good idea and you aren’t going to lose valuable guarantees. It’s also not a good idea to move from an active employer scheme as you risk losing employer contributions (unless your employer is willing to pay into a new scheme for you – you can ask about this).

It’s much easier to move old defined contribution workplace schemes than it is defined benefit schemes – and moving the latter is often not a good idea financially.

You can move old pensions to your current workplace scheme if that makes sense for you, or you can choose a completely new personal pension provider to consolidate your old pensions.

The process is usually that you research your new provider and plan and get in touch with them. You’ll need details of your old pensions to hand – specifically, the providers and policy numbers.

There’s a free government pension tracing service that can help you find them if you have lost the details. The new provider can do the work of contacting your old providers and initiating the transfer. 

‘What exactly is a Sipp?’

A Sipp is a self-invested personal pension. It’s one you set up for yourself, and offers a range of investment choices: either a selection of ready-made plans, or stocks and shares – a bit like if you had a stocks and shares Isa.

They are a popular choice for people who want more control over where their pension is invested than is typically available via a traditional workplace scheme.

‘How much should I be paying in charges?’

It’s important to keep an eye on charges as they can have a surprisingly detrimental impact on your retirement savings over time.

As a general rule, anything over 1pc would be pricey. Some workplace schemes carry charges far lower, at around 0.3pc to 0.5pc, but they cannot go over 0.75pc in any case because there is a cap. 

Charges for some plans or investments with personal pension providers can be higher, usually if those investments are actively managed. Most workplace schemes are invested passively, which enables them to offer lower charges.

‘What’s considered a ‘good’ investment return?’

According to the Barclays’ Equity Gilt study, which examines long term returns, the average annual stock market return is around 5pc. Net of charges, this would be lower – so anything around 5-7pc would be considered above average. 

Pensions are long-term investments. The ultimate aim is to beat inflation over time. However, because they are long-term, there can be some big ups and downs along the way. 

This might make pensions seem less appealing – you might wonder what the point is of investing if you are going to come out on average with a return not much higher than a savings account.

One of the things that makes pensions so attractive as a long-term investment is the tax relief on the initial contribution, plus investment growth compounding over time.

‘How often should I review my investments?’

Once a year is probably enough. Reviewing them too frequently can cause unnecessary anxiety, particularly in volatile times. Even worse, it can cause people to chop and change their investments too frequently, when letting them simmer for a longer time would produce a better result.

‘What tax do I pay when I take my pension?’

The first 25pc you take out is tax-free. Once you start to drawdown an income or take an annuity what you take is subject to income tax at your marginal rate. Most pensioners are basic-rate taxpayers. 

What you leave in a pension is generally not subject to inheritance tax for your beneficiaries and if you die before age 75 they would normally not pay income tax, either. 

‘What age can I take my pension?’

The Normal Minimum Pension Age (NMPA) is 55, rising to 57 from 2028. Some pensions associated with certain occupations have lower minimum ages. You don’t have to start accessing your pension at this age, but you can if you want to.  

‘How much do I need for a comfortable retirement?’

The definition of “comfortable” may be subjective, and will certainly depend on the your fixed costs, as well as the cost of the things you want to do in retirement – those who live in a bigger house may need to set aside more for upkeep, for example. 

However, it’s good to have at least an idea of how much you might need, which is why the Pensions and Lifetime Savings Association (PLSA) has come up with some retirement living standards. It says a comfortable retirement would cost around £43,400 a year for a single person and £59,000 for a couple. 

The pot size required for these amounts, again according to the PLSA estimates, would be between £490,000 and £790,000 for a single person and between £280,000 and £450,000 for a couple.