The Pension Review Process
Most people are more than familiar with reviewing finances; they do it without even thinking. Searching the internet for better deals on house and car insurance, ensuring that they are on the best tariff for home energy.
Many will check every year the interest rates paid on their cash deposits in the bank and ISA.
If the rates are better elsewhere there will be no hesitation in moving the money for a better return. However, a pension review is something that many don’t undertake!
Sow a seed and leave it in the dark without water, would you expect it to grow?
Yet; the largest asset that most will ever own outside of the family home, often gets left in a draw. I gets left un cared for in the vague hope that it will somehow look after its self!. Money gets taken from our bank or direct from wages each month and gets added to this mysterious investment, and yet we still don’t look at the quality of what we are buying.
We spend hours searching the internet looking to save a few pounds on the latest ipad, which will allow us to look to save the next few pounds just a little faster next time! Yet still we spend no time researching, managing and caring for that little piece of paper that one day aims to take care of us for the rest of our lives.
Your pension can and should work for you to provide a better quality of life when you retire. Looked after correctly it can enable you to do more in retirement, or even start your retirement early. Yet it remains unloved, in the draw, hoping that it will produce spectacular results if only you give it time.
Whilst time is important when looking at a long term investment, regular checks on fund selection, performance and charges will enable you to make regular tweaks and keep it in line with your expectations.
You may have picked the top performing funds when you set up your pension originally, but are they still top performing? Chances are that they are not, but how do you know unless you take it from the draw and include it in your annual finance check.
Many things can affect the performance of a particular fund or portfolio and turn it from a market leader to a dog!
- The fund manager could leave, retire or die, leaving the management to someone else who may not have the same level of experience or expertise. No need to look much further that Manchester United to understand the importance of the right manager for a particular job.
- Performance or lack of can cause an investment portfolio substantially changing in risk over time. This can lead to an investment not being well placed to take advantage of or protect against certain economic situations.
- Some older pension plans can be highly charged which reduces the ability for growth.
- The best performing funds at any one time are unlikely to remain at the top for long. This is due to the fact that funds only get to the very top of the list by taking large risks.
So why is it that so many pensions are not closely monitored and changed on a regular basis to reflect changes in market conditions, personal circumstances and poor fund performance?Unfortunately the answer is relatively simple. The average person who invests into a pension does not fully understand how they work or how they are charged, let alone have the resources to monitor them against alternative options. This becomes even more difficult when looking to track fund performance against benchmarks and knowing whether a fund is doing its job effectively or if it should be replaced by another. Leaving your retirement fund to chance, can be as affective as pouring your money down the drain! You work hard for the money you get, so make sure the money you invest works equally hard for you.
When we are faced with a job that we don’t understand we have 3 choices. Put the job back in the draw and hope it will all be ok in the end. Spend time to educate ourselves so that we can do the job. Get a professional involved, who has the experience to do the job correctly first time.
Taking regular pension review’s will allow you the peace of mind that one of your most valuable assets is being looked after in the way it deserves. You are in the knowledge that the funds chosen are under constant scrutiny and will be replaced if they are not fit for purpose. Charges, which can be detrimental to performance, are also being reviewed to ensure you are always receiving the best value for money.
Don’t leave your pension income to chance, once you reach retirement you can’t go back and change the decisions you made. Make sure your pension is monitored on a regular basis by people who know what they are looking for and build towards a happy and prosperous future.
As our name suggests, The Pension Planner manages retirement strategies. Our service to clients includes initial research to identify what is currently held. Conduct a pension review against what is available in the current marketplace and ongoing management of the underlying funds held in your pension. We ensure that we know you well and fully understand your goals and objectives; this allows us to manage your assets in the most suitable way.
Contact us now for a free initial meeting where we can take an overview of your situation and evidence the benefits of our service. This meeting is of course without obligation and on the rare occasion that we don’t believe we can add value, we will tell you so.