Time to review your pot?

Well here we are into the New Year and I am sure it’s not quite the start we had all hoped for. I think the expression “Sometimes things have to get worse before they get better” comes to mind. However, many of us do have time on our hands at weekends with limited places we can venture to. So it could be a good time to organise finances – as I have noted before, having a project is so important for our mental health.

Often an individual’s second biggest asset after property is their workplace pension scheme, or as it is sometimes called an ‘Occupational Scheme’. This could either be a ‘Defined Benefit’ scheme (‘Final Salary’) or a ‘Defined Contribution’ scheme. A ‘Defined Benefit’ provides a guaranteed income for life and will have a set retirement age, whereas with a ‘Defined Contribution’ scheme your employer and usually yourself pay a portion of your wages into your Pension with the aim to build up a pot of money for your retirement.

The question to ask yourself, if you do have a workplace scheme, is how much understanding do you have of yours and when was the last time you reviewed it? Your paperwork should clarify which one you have and if in any doubt do ask your employer.

Defined Contribution schemes
As these do not have guarantees they need more monitoring, your choice of Pension funds can make a big difference to the final amount. We often see individuals who have accumulated Pensions they have not reviewed, and they are usually invested in a ‘Default Fund’ which is designed to fit all, to meet the needs of both younger and older employees. The question would be: is this the most suitable for you?

Many people underestimate how much fund performance can differ. Most Pension schemes offer a range of other funds and we would suggest you ask your employer for a list of available funds and then compare these to the one yours is in. However the performance of a fund is not the only factor, it’s also important to consider the risk profile and diversification of a fund. For example, an individual fund may have a better performance but it will not be right to switch your whole pension into it as this may not match your risk profile, and would not have the diversification we would recommend. So during this difficult time this could be an ideal time to look at your Pension. If you need help we do offer a free without obligation consultation so why not pick up the phone and give us a call.

Allowances, limits and thresholds correct at the time of writing, but are subject to change in the future. Please confirm the current position before taking any action

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