It may not come as too much of a surprise to realise the state pension is not the solution for a prosperous retirement.
Many more people living much longer adds up to increased demands on government funds. Even with state retirement age going up to 67, it’s looking increasingly unlikely that the State Pension will provide more than a subsistence allowance – not what you want to look forward to after a long working life.
It means that retirement planning is becoming an ever bigger priority.
But you already have pension plans
It’s easy to think that a pension is something you can arrange once, and forget about until you turn 65 and retire rich. Sadly, things are not that simple. Of course you probably have a workplace pension (especially with the introduction of Auto enrolment). Perhaps you have a personal pension or two – but do you know how they are actually performing? Do you know what your pension pot will actually be when you reach retirement – and do you know if you could make the money in your pension work much harder?
If you don’t, its time you had a pension review.
What is your pension worth?
Ask most people how much they earn now and they’ll know, usually down to the last pound. Strangely, the same people often have no idea what their pension is worth – other than ‘not enough’.
If the arrival of your annual pension statements and their contents comes as a surprise, you are probably not paying enough attention to your retirement prospects – making a review even more urgent.
Pension planning is an ongoing process
A pension review is a chance to sit down with and pensions expert and look at the how your pension plans are working out.
You can’t simply make pension arrangements and think you’ve got your future sorted out. Like any investment, your pension arrangements need to be monitored and from time to time changed if you are going to look forward to the kind of retirement you want. Its best to review them at least every five years.
There are plenty of reasons why. Your pensions could be invested in funds that aren’t performing well or are no longer appropriate. Investment funds rarely continue to perform well year after year, so regularly checks are essential.
What’s more, your pension plans could have charges and fees that are uncompetitive by current standards. A transfer to a modern plan could mean that more of your contributions go towards building your retirement pot – although you’ll need to check what exit fees there might be to leave your current plan.
There’s another thing to consider. The closer you get to retirement, the less likely you are to want to have investments with an element of risk. By the time we’re close to retirement we may not wish to take much risk at all. Rebalancing your portfolio to reflect the risk you feel comfortable with is part of effective ongoing pension planning.
Have you kept track of your pensions?
The average UK worker has several employers during the course of their working life and may have started a new pension with each one. Now, with employees being automatically enrolled into a pension, things may be more complicated still.
Unless you have doggedly transferred your funds every time, the old plans get left behind, probably still growing, but almost certainly not as first as you’d like it to be.
Over 40+ years of work you might accumulate half a dozen neglected pensions that could all be doing much better for you. A pension review could help you find them, and get the money you’ve invested working hard for you again.
You can’t afford to leave it too late
There have been some very big upheavals in the financial world in recent years. You must make sure your investments are working as intended – and you may want to take advantage of new developments, such as the Lifetime ISA.
The closer you get to retirement, the more important it is to know how your pension fund is performing. Waiting until retirement is near means it’s too late to make any changes. The longer you have to prepare for retirement, the more chance you have of doing something about it and achieving a comfortable retirement.
This means that the best time to arrange a pension review is right now. Contact the Continuum team for the expert help you need.