In our continual bid to help as many people as possible reach the goal of having a ‘financially secure and comfortable retirement’, we present and comment on some of the interesting articles we come across. One such article – Five steps to pension perfection – appeared in The Telegraph and we thought it so good that we decided to comment on each of the five steps in a mini-series. (To read the original article, please click here.)
It comes at a particularly appropriate time as we’re putting the finishing touches to the ‘Pensions’ section on our website (visit Pensions). There’s a lot of useful information in this section and we hope we’ve presented it in an easy-to-read yet informative way. Pensions are complex: our aim is to try to make the subject less intimidating than it can sometimes appear so we recommend you visit the website if you’d like more information about what we’re saying here.
The Telegraph’s Sam Brodbeck suggested that anyone wanting to get a grip of their pension does so in five steps: 1) make sure you know what you’ve got; 2) boost your contributions; 3) maximise tax relief; 4) match your investments with your plan, and 5) consider transferring to an alternative scheme.
This last point is sometimes never considered as, all too often, most of us aren’t particularly pro-active when it comes to pensions, the subject’s complexity tending to provoke a rather fatalistic attitude of ‘it is what it is’. We need to remember who our pension is for and how important it is – it’s for us, and it could make a huge difference to our lives and for very many years to come. Spending a little time managing our pension assets can only be a (very) good thing! Yes, pensions are complicated, but that must never be allowed to be the reason for any lack of action. There are experts who can help – having a good financial adviser will overcome any difficulties.
Having gathered together all the info you can about the pension assets you have and reviewed them against your plan it’s probable that you and your adviser will see a variety of ‘issues’, particularly if you’ve had a lengthy and varied working life.
Although some of your assets may offer a good return with flexible terms and meet your needs entirely, others may not. The Telegraph outlines a couple of scenarios but there are many, many more – some will be obvious but some will only come to light by carrying out a thorough review. A typical example concerns defined benefit company schemes. These are offered as an employee benefit – but, remember, they also have to satisfy the needs of the company. If you’re over 55 and are eligible to transfer out of the scheme it may be well worth while looking at reinvesting your pension pot elsewhere.
It’s also worth remembering that pension schemes are long-term saving schemes. You may have been contributing to a scheme for years but forgotten to question whether it continues to meet your final objectives and, if it doesn’t, change it so that it does. ‘Life’ may have changed significantly over the period you’ve been unquestioningly contributing – is it still appropriate, would the money work better for you elsewhere, maybe as a different form of asset or paying off a long-term debt? Can you transfer out?
The purpose of having a pension is to provide a ‘financially secure and comfortable retirement’. Our circumstances and plans change and we should always try to manage our finances accordingly and that includes managing the money we are saving for the future – if it’s not working hard to meet the same plan then it may need to be changed.
Pensions are incredibly complex so the recommendation is always to get advice from a suitability qualified, independent financial adviser. Their experience will allow them to ask you the questions you need to answer; provide alternative solutions and help you manage your pension effectively: it’s called retirement planning.
One Financial Solutions is here to help you. As independent financial advisers we’ll do just that: we’ll review your circumstances, help you understand your aspirations and explain what you need to do to reach them. It’s good to talk so please call us on 020 3714 9565 for a confidential chat or ask us to call you by sending an email to email@example.com.