Most of us have plans to retire at some stage and love or loathe them the majority of us will rely on some form of pension to provide our income in retirement.
So given our reliance on pensions why do so many people not know what they will get when they retire? Why do so many people ignore their existing pensions from year to year?
Judging by conversations we have on a daily basis there seems to be a real mistrust of pensions, the pensions industry and the government (of whatever colour) when it comes to pensions. We’d love to hear your comments at the bottom of this article as to why you think pensions are generally unpopular.
In the meantime two facts remain true, firstly most of us have existing pensions of some sort, and secondly almost all of us will rely on some form of pension income to keep us in retirement.
It seems to us that mistrust and a general lack of interest in pensions are stopping people reviewing their existing pensions and potentially therefore having less income in retirement.
So, what are the benefits of reviewing your pension?
There are numerous benefits of reviewing your existing pensions, to name a few:
- Information. You will gain a better understanding of the income you can expect to receive in retirement and when you may be able to finish work
- Performance. You will get to find out how the pension is performing, is it actually making money, standing still, or worse, going backwards
- Costs & charges. You will get a better understanding of the amount you are being charged to run your pension each year and whether you are getting value for money
All of the above are important, however we believe that the key benefit of reviewing your pension can be summarised in two words: knowledge and understanding.
The more you know about your pension, the more you will understand, this then often leads, in our experience, to people taking a greater interest in their retirement planning.
“But won’t a financial adviser just want me to pay more?”
We believe that this could be one of the reasons why people don’t review their pensions, the fear that their chosen adviser will only be interested in getting them to pay more into a plan they already don’t trust.
This is understandable and we should address it here.
A good financial adviser will spend time with you talking through your retirement goals, looking at all the ways in which they can be achieved (and that doesn’t just mean a pension), then tell you how close to hitting your targets, and what you need to do to bridge that gap, if indeed there is one.
It is then down to you whether you do anything about your new found knowledge, you might realise there is a shortfall but you can’t afford to do anything about it at the moment; that’s fine, at least you know what the situation is.
A good financial adviser should give you options, and sometimes steer you in a certain direction, but never against your will or means.
It’s a bit like a check up at the doctors
You might not want to go, but when you make the effort you will probably feel much better, and you’ll definitely have a clearer understanding of how to stay healthy, what exercise you should take and the food you should eat.
Having your pension reviewed is very similar, it will never be the most exciting thing you do, but it is so worthwhile, and we almost guarantee you’ll feel better for having done it.
Compare a pension with your car
This might seem like a strange comparison, but bear with us.
You probably know how much you paid for your car, how much a tank of petrol costs and how many miles you get from that tank. You also probably get it serviced every year and MOT’d when you need to.
So, you know how much you ‘invested’ in the car, you know the cost, you know the performance, and you look after it on a regular basis.
Assuming you want to retire at some point, why don’t you do the same with your pension as you do with you do with your car?
Your car gets you from A to B, your pension could be providing you with an income for 30 years or more, which should really get more attention?
Making the best of what you have
If you are one of those people who knows planning for your retirement is important, but you just can’t afford to put anymore aside then a review of your existing plans is even more important to make sure they money you have set aside is working as hard as it possibly can.
Whether you love or loathe pensions, the money you have invested already isn’t coming out until you retire. For a whole range of reasons it therefore makes sense to review existing plans.
Not knowing what you have is not an excuse!
So many people don’t know what pensions they have.
With the frequency we change jobs and houses these days, as with as the numerous mergers of pension providers, it’s probably not surprising that people lose track of their pensions.
This really shouldn’t be an excuse though to not review your existing pensions!
We can help to track down pensions that you have long since lost touch with and then review them, initially to make sure you understand what you have got, but also to confirm whether or not it is working as hard for you as it could be.
So, if you’d like to learn more about your existing pensions, even if it is just a case of finding out where they are and what they will give you in retirement, you have two options. You could take the DIY approach, or you could take advice.
Both routes have advantages and disadvantages, however if you are inexperienced in dealing with pensions, or are one of those people “who just doesn’t understand them” we’d suggest you have a chat with one of our friendly advisers.
If you feel that now is the time to put off looking at your pensions for no longer, or would like to know more about the benefits of a pension review call one of our IFAs today on 0115 933 8433, alternatively enquire online or email firstname.lastname@example.org