When you’re planning for retirement, there are several potential threats to your pension that it’s important to be aware of, such as scams and stock market crashes.

If you’re not careful, these could potentially see the value of your retirement savings plummet, or even go up in smoke. Fortunately, though, there are steps you can take to protect your pot and give your pension the greatest chance of providing you with enough income for a comfortable retirement.

Here, we look at five ways to protect your pension from potential threats that could reduce the size of your pot, or even wipe it out altogether. 

Remember, if you want personal recommendations about where to invest your retirement savings, you’ll need to seek professional financial advice. You can find a local financial advisor on VouchedFor or Unbiased, or for more information, check out our guides on How to find the right financial advisor for you or How to get advice on your pension.

If you’re thinking about getting professional financial advice, you can find a local financial adviser on VouchedFor or Unbiased.

Alternatively, if you’re looking for somewhere to start, we’ve partnered with independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.

Fidelius are rated 4.7 out of 5 from over 1,000 reviews on VouchedFor, the review site for financial advisors.

1. Spread your pension investments

If you’re worried about stock market crashes detonating your pension pot, the best strategy is usually to ensure your portfolio is well-diversified. This means spreading your pension investments across a wide range of different asset types such as UK, global and emerging market equities, bonds, cash, and alternative investments such as commodity and commercial property funds. 

If you’re paying into a workplace pension this will usually be done on your behalf, as you’ll probably be invested into a so-called ‘default fund’, unless you’ve chosen a different fund. The default fund automatically changes the underlying investments as you approach retirement. The closer you get to retirement, the more you’ll probably be moved into investments that are considered less risky such as bonds and cash. However, if you still have some time to go until retirement, you may be comfortable taking more risk with your investments, and most workplace schemes offer a range of well-diversified funds that you can switch to. 

If you’re paying into a personal defined contribution pension, you may be able to choose from a range of ready-made, diversified portfolios. Alternatively, if you’re paying into a self-invested personal pension (SIPP) then it’s up to you to ensure that your investments are spread between different assets. You could choose a multi-asset fund as a core part of your pension portfolio, such as a Vanguard Lifestrategy fund or a Blackrock MyMap fund, for example. This can be a simple way to ensure your portfolio is diversified and can potentially withstand stock market shocks. Read our article Where is my pension invested? for more guidance. Please note these are not recommendations and the right funds for you will depend on your individual circumstances including your approach to risk and your investment timeframe.

Get your free no-obligation pension consultation

If you’re considering getting professional financial advice, Fidelius is offering Rest Less members a free pension consultation. It’s a chance to have an independent financial advisor give an unbiased assessment of your retirement savings. Fidelius is rated 4.7/5 from over 1,000 reviews on VouchedFor. Capital at risk.

Book my free call

2. Check your pension’s safety net

There have been several high profile scandals that have sent shockwaves through the pension industry, such as media mogul Robert Maxwell stealing his employees’ pension savings, or Equitable Life, one of the country’s biggest insurers, failing to meet policyholders’ annuity guarantees. While these scandals were devastating for those affected, they resulted in more safeguards being put in place to protect people’s pensions. Even so, it’s important to ensure you understand the protection your particular pension has in the event of a provider going bust. 

If your personal defined contribution pension provider runs into financial difficulties, your money should be safe, as it is not owned by the pension provider, so it cannot be taken by creditors. In most cases, your money will be held separately in specific investments that you’ve chosen and these will remain ring-fenced if the provider is no longer in business. 

Personal pensions, such as self-invested personal pensions (SIPPs) held on an investment platform, are also protected by the Financial Services Compensation Scheme (FSCS) up to £85,000 per firm. If you have a pension, and your provider has gone out of business, you should be protected up to this limit. However, you’ll only be protected by the FSCS if your pension provider or adviser was authorised by the Financial Conduct Authority (FCA). If you’re concerned about whether your pension is protected check the FSCS site here.

If you’ve bought an annuity with your pension to provide you with an income for life, the rules (since April 2019) state that you could be eligible for 100% of your claim for pension compensation on your annuity contract. 

If you have a defined benefit pension and your employer goes out of business, the Pension Protection Fund is the service you will need to use to see if you are eligible for any compensation. It will usually pay you up to 100% of the value of your pension if you’ve reached the scheme’s retirement age, or 90% if you’re below the scheme’s retirement age. Find out more in our guide How safe is my pension?

3. Check your pension charges

If you’re not careful, charges can eat into your retirement savings over time, leaving you with less to live on when you stop working. The Government has capped fees for employees who are auto-enrolled into workplace pensions at 0.75%, but some older schemes come with far higher charges.

The majority of pension providers charge a percentage fee, which may range from a competitive  0.15% a year to more than 0.75%. If you’re paying more than 0.75%, this is generally considered expensive, and there are lots of low-cost providers you could potentially move to. Some providers charge a flat fee, which may be preferable for larger pension pots, as no matter how large your pension grows, your fee stays the same. Find out more in our article What pension charges am I paying?

4. Don’t fall victim to a pension scam

Pension freedom reforms introduced in April 2015 are considered to be partly behind the rise in the number of pension scams around, as the over-55s are now able to access their pension pot and do as they wish with their retirement savings. This makes their retirement savings a target for fraudsters who want to get their hands on this money.  

Pension scams can take many forms. For example, you may be contacted by a scammer and offered a free pension review. If you provide your details, you may receive a call or visit from someone claiming to offer financial advice, who will recommend that you move your money into another scheme, or fake investments. Another common scam involves being offered early access to your retirement savings. Remember that you can’t access your pension before the age of 55 (rising to 57 in 2028), and if you do you’ll pay a hefty tax charge. 

To avoid falling victim to a pension scam, ignore people who cold call you about your pension and make sure to take charge of your own pension planning, and if you’re seeking advice, only use companies regulated by the Financial Conduct Authority. Read more in our articles Latest scams to watch out for in 2023 and Don’t let scammers steal your retirement.

Prepare for retirement with our pension checklist

Planning for the future doesn’t have to be complicated. Our seven-step checklist can help you make sure you’re on track to achieve the retirement you want.

Read more here

5. Don’t lose track of old pensions

You don’t want to miss out on any of your pension savings because you’ve lost track of them. 

However, if you’ve worked for several employers over the years, you may have forgotten about or lost track of a pension. Tracking down missing pensions and getting hold of any missing retirement funds could make a big difference to your retirement savings. If you know which pension provider an old pension is with, call their customer service number and see if you can locate your pension. You might be able to find some old paperwork with the provider’s name and your account details on.

If you cannot remember which pension provider you were with, you could start by contacting your former employer. You’ll usually need your National Insurance number, name and address to find your old pensions. If you cannot track down an old pension you can use the government’s Pension Tracing Service (0800 731 0193). Find out more in our guide How to find old pensions and trace lost pensions.

You can find a local financial advisor on VouchedFor or Unbiased, or for more information, check out our guide on How to find the right financial advisor for you.

If you’re thinking about getting independent financial advice, financial services company Fidelius is offering Rest Less members a free initial consultation with an independent financial advisor to chat about your finances, where you are now, and where you want to go.

There’s no obligation, but if they feel you’d benefit from paid financial advice, they’ll go over how that works and the charges involved. Fidelius is rated 4.7/5 from over 1,000 reviews on VouchedFor, the review site for financial advisors.

Rest Less Money is on Instagram! Check out our account and give us a follow @rest_less_uk_money for all the latest Money News, updated daily.