Future Proof Your Finances: Looking at Your Pension

We all make plans for our futures, but there is always the chance that events in the here and now can derail them.

Events like the spiralling inflation of the past 18 months for example. Those rising prices don’t just mean higher costs now – they mean we all need more in our pension pots to afford the kind of retirement we want.

But not all events of the past year or so are bad news.  Rising interest rates might mean your pension savings could provide a higher income than you have previously bargained for.

So, is the overall outlook for your pension better or worse? You can’t leave your future to chance. It could be time for a pension review.

A pension review evaluates your pensions, retirement savings, investments, and financial plans to help ensure you are on track to meet your retirement goals. You need to know you are on the right track – making sufficient contributions and having the appropriate pension strategy.

How to review your pension

Your review needs to look at the figures behind your pension plans:

The current value of your pension pot and investments: This should be simple to work out. Your pension provider or providers will issue an annual statement of the amount currently stashed away for you.

Your projected pension pot: When you can see your current pension savings, you should be able to work out the level they will be at when it is time for you to retire. 

Armed with this figure, you can start to work out your possible retirement income. This may be more complicated, because it will depend on how you use your pension pot. 

If you use it to buy an income guaranteed for life, you need to know what annuity levels will be when you retire. But you will need to consider that further you are from retirement, the less certain you can be about what annuity rate you might be offered. 

If you are thinking of using drawdown to provide an income from your pot while leaving the rest invested, you need to have some idea of the kind of interest it would be earning. 

Making this kind of projection can be difficult, but getting professional help is simple. Call us at Continuum. We have developed effective methods that can give an objective view of how your pot will potentially grow, and the kind of income it may bring you.

But beware the effects of inflation. If you had projections drawn up when you first started looking at your pension plans, the effects of inflation might mean those figures need to be revised. The kind of pension pot that would mean a comfortable income ten years ago might look much less adequate now, after a period of double-digit inflation. It might look even less rewarding after another ten years have passed.

Even if your review shows your pension pot growing as you hoped when you arranged it, rising prices mean that you might need to look again at your pension targets – and aim considerably higher.

What if your review shows a shortfall?

Many people discover that their pension is going to fall short of the level they need when they retire – but fortunately, if you can see that shortfall coming you can take steps to help avoid it.

  • You could simply decide to add more to your current pension plan. If you can afford to, this can be doubly rewarding, because, thanks to the generous tax relief you can enjoy on pension contributions.
  • You could look at the performance of your current pension plan. High fees and sluggish performance can cut into pension pot growth. It might be possible to transfer your pension pot – but this is never something to take lightly.
  • Or you could find a new pension strategy – an alternative way of building and using your pension to make it more rewarding.

What should you do?

At Continuum we are keen to provide a full pension review and forecast of the kind of pension you are looking at now.

But we won’t stop there. If your review reveals underperformance, we can help you find alternatives to your current plans, and a new strategy that can make your pension contributions work harder for you – and put the kind of retirement you want back in reach. 

To find out more, contact us today.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment or retirement strategy, you should seek independent financial advice before embarking on any course of action.

A pension is a long-term investment, the fund value can go down as well as up and this can impact the level of pension benefits available. Pension Income could also be affected by interest rates at the time benefits are taken.

The Financial Conduct Authority does not regulate taxation advice.

The tax treatment of pensions in general and tax implications of pension withdrawals will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future.

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