Most of us will have pensions that we have accumulated over the years, some of us will have carefully monitored them and chosen investments wisely using the help of professionals. We have chosen the level of contribution to ensure that we have enough money at our chosen retirement age; and able to fund the level of income we require to ensure a comfortable lifestyle once salary from employment stops. We have also factored into this calculation our capital needs outside of our day to day needs, to cover things such as new cars, holidays, Christmas and birthdays. This represents perfect retirement planning, however, it also represents a small proportion of society.
The reality is that many will have collected pensions throughout their working lifetime, paying in whatever was required to be a member of a pension scheme. These plans often lay dormant in a kitchen drawer waiting to be joined each year by the next annual statement. The monetary amount given as a value does not relate to the income it will provide; and there is little real knowledge of just how much capital is needed to provide a comfortable lifestyle in retirement. This is in part, due to not considering just how much income will be required. This is the gap between your pension plan value and your retirement needs.
It is true that we spend countless hours researching our next holiday to make sure it is everything we want it to be; whilst ensuring we don’t spend more than is necessary. We check each year to make sure we have the most competitive car, house and contents insurance premiums and move cash ISAs from bank to bank to get an extra ‘0.something’ interest rate. Yet the one thing that will make this all still affordable in retirement remains in the drawer, waiting to be joined by next year’s statement.
Review one of your largest and most important assets.
Your pension is generally the largest asset you will own outside of your home; in fact, many are larger! It is going to support you when you no longer work and have a regular income. It will take you on holiday, take you out for lunch, buy your next car and put petrol in it. This is something that deserves to be cared for, it deserves your attention.
Investment choices that were made years ago are unlikely to be the ones you would choose now, so make sure you look at these choices often and ensure they suit your needs and market current conditions. You should get a good idea of how much you need as an income in retirement, work out how much capital is required to provide this, and then contribute accordingly. If this is a figure that is not affordable you, may wish to consider delaying your retirement date to help increase your pension income. Pension plan charges vary, and old plans can be expensive compared to those available today, but cost isn’t everything so plan options, guarantees and fund choices need to be part of the review process.
Modern cars get taken to the experts to service, professional builders erect our extensions and our health is left in the trusted hands of the medical profession. So it is reasonable to conclude that your retirement plans would be best serviced by financial professionals that clearly understand pensions, tax implications and retirement related options.
At The Pension Planner we provide people with exactly this service, and ensure that our clients reach retirement in the best condition possible. Importantly we make sure that our clients fully understand their options and have realistic expectations of what their retirement is going to look like. If you would like to go through this review process with us, we would be delighted to hear from you and spend a little time showing you the benefits of keeping track of your retirement plans.