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Pensions and retirement planning are one of those areas that many of us let fall by the wayside. Retirement often seems like a distant concept and it is common practice to think that you can put your retirement plans in place and leave them unattended for years on end. But this couldn’t be further from the truth.
As with any other aspect of your personal finances, it’s essential to conduct regular reviews of your pension and other protection arrangements to ensure that they fit best with your current situation.
A Healthy Retirement
A regular review will ensure healthy progression towards retirement by checking that you are firmly on track with your retirement goals. This is the time to adjust your plan to fit any evolving needs and desires for your post-retirement years. We all change as people over time and our pension pot needs to reflect our most current reality.
Reviews represent an important time for you to reassess how much you could retire on – a professional fund manager may also be able to give you a good idea of how much you can expect to receive from your fund on retirement (although nothing is ever set in stone). After all, when it comes to retirement, pre-prep is key. Why would you take a comfortable retirement for granted when you’ve worked hard your whole life?
A review is essential when key changes in your circumstances take place that may affect the structure of your other protection arrangements and insurance policies. Life cover, private health insurance and critical illness cover should all be reviewed in the case of divorce, remarriage or another major change in your life. This is essential to ensure that the level of cover you have taken out and the details have all set up the best possible protection for you and your dependents.
When changes in your personal circumstances take place, risk also becomes a key consideration. Did you know that (according to Professional Adviser and research by Royal London) three-quarters of a million people coming up to retirement are at risk of their pension being passed on to an ex-partner when they die?
This research suggests that issues arise when expression of wish forms have not been updated to reflect a person’s current circumstances, where divorce or remarriage has meant that the “next in line” for benefits will have changed. If you don’t stay on top of things, that means your ex-partner could be the person to receive pension death benefits should you pass away.
An expression of wish form is a key document that exists alongside consulting wills and verbal communication with surviving family members to ascertain how your pension death benefits should be divided. According to the Royal London survey, around 20% of the 6.7 million people surveyed aged 55-64 had remarried by the age of 50. When we pause to consider the additional people in this bracket who are cohabiting with a new partner following a divorce, that is a huge number of people potentially affected by simply failing to consider the importance of keeping your financial arrangements up to date.
Regular reviews also offer an opportunity to highlight funds that not performing quite up to scratch. While certain funds might have been top performers when you initially set up your pension, they may have weakened over time and impact on the overall resilience of your plan, especially during economic downturns.
It’s important to assess whether each fund still represents a cost-effective option and return on investment, to work out whether a fund is doing its job effectively or if it should be replaced by another and to identify potential replacements.
Review of Charges
Another important part of a financial review is to identify any unnecessary or outdated charges. Pension products are developing all the time and charges have greatly reduced over the past few decades. A review will make sure that you are getting the most out of your pension, particularly if you have an older plan where management fees are typically higher than today’s options. Identifying, amending or removing any unnecessary charges will have a positive overall impact on returns to ensure that a fund is free to perform at its best level.
A customer’s personal approach to risk may change over time which may create a need to restructure financial plans. For example, if your retirement goals have changed then you may be willing to take more risks to achieve your final objective. If your fund has been performing well for years and you are on track to enjoy the retirement that you dream of, this is also the time when a specialist can suggest even more scope for growth to enhance your financial success.
How Often Should You Review Your Arrangements?
Many of us feel overwhelmed by financial planning and hope that things will tick along nicely without any support. But finances need nurturing in order to perform at their best level. While pensions represent a long-term investment, they require regular tweaks to stay in line with your own objectives as well as current market performance. Our professional specialists at Vintage Wealth Management review pension plans and protection arrangements against the current marketplace to identify any risk and any scope for growth. We also work closely with our clients to ensure that their current arrangements are in line with their goals, requirements and objectives.
There are no hard and fast rules when it comes to how often you should have pension and financial reviews. It depends on your age, how close you are to retirement and whether there have been any significant changes in your life. As a general rule, we would suggest arranging reviews every two years, or ad-hoc if you feel that your circumstances warrant it.
Our experts at Vintage Wealth will help you to understand how your pension plan and protection arrangements work for full transparency and peace of mind that your key assets are in good hands.
If you would like to arrange a review of your pension and/or protection arrangements, please give our expert advisers at Simmons Gainsford Financial Services a call on 020 8371 3143 or email email@example.com
Posted on 16th Nov 2023
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