As people spend longer and longer enjoying the freedom of retirement, your pension assumes greater and greater importance. That importance is overshadowed by the complexity of the whole subject – a complexity that is made even more serious by periodic changes to the rules regarding UK pensions.
Take the changes that were introduced by the government with effect from the spring of 2015, and detailed in a report by the BBC, for example. The ins and outs, the pros and cons, seem almost overwhelming.
What with Defined Benefit (DC) pension schemes and Defined Contribution (DC) schemes, with options on when and how much to drawdown or purchase annuities, it is a complicated picture indeed. It might even be enough for you to just give up and hope and pray that whatever pension arrangements you have are best just left as they are.
It all suggests that things have changed very little since we revealed several years ago that as many as 60% of people are content to leave things as they are and not question their current pension plan.
Take a closer look at your pension
A story in the Mirror newspaper on the 24th of August 2016, however, gives a timely reminder about the value of taking a closer look at your pension arrangements and make sure that the money you are saving for your retirement is working its hardest on your behalf.
Pension advisers Profile Financial , for instance, suggest three basic and relatively straight forward questions you might ask to test whether your pension is likely to represent a good and financially rewarding deal:
- you are paying an annual fee to your pension fund manager – is that fee fair, reasonable and, most of all, competitive?
- your individual circumstances result in particular preferences for the risks associated with your pension fund’s investment portfolio – are those risks reflected in the way your find performs?
- if you decide on a pension transfer to a different scheme, what if any, financial penalties are you likely to face?
If your answers to the first two questions are less than favourable, you might want to consider pension switching. If you currently have a number of different pension schemes, this might be an especially effective and timely way of consolidating them into one place – not only simplifying the whole business of managing your pension but also minimising administrative fees and commissions.
Weighing up the advantages of switching pensions may not be the easiest or most straight forward of exercises, so you may want to make careful comparisons and get independent financial advice before pressing ahead.
If you decide to transfer to a different pension scheme, the same financial adviser is able to monitor the performance of your new fund and to recommend any further adjustments which may be necessary.
Remember that it is your pension fund at stake and one that it going to be important in helping you maintain the lifestyle you have worked so hard for during your retirement. No one size fits all when it comes to pension arrangements, so make sure that you tailor yours to suit your particular, individual needs and circumstances.