Consolidating pensions
Most people, during their career, accumulate a number of different pension plans. Keeping your pension savings in a number of different plans may result in lost investment opportunities and unnecessary exposure to risk. However, not all consolidation of pensions will be in your best interests. You should always look carefully into the possible benefits and drawbacks and, if unsure, seek professional financial advice.
Keeping track of your pension portfolio
It’s important to ensure that you get the best out of the contributions you’ve made, and keep track of your pension portfolio to make sure it remains appropriate to your personal circumstances. Consolidating your existing pensions is one way of doing this.
Pension consolidation involves moving, where appropriate, a number of pension plans – potentially from many different pensions’ providers – into one single plan. It is sometimes referred to as ‘pension switching’.
Pension consolidation can be a very valuable exercise, as it can enable you to:
Bring all your pension investments into one, easy-to-manage wrapper
Identify any underperforming and expensive investments with a view to switching these to more appropriate investments
Accurately review your pension provision in order to identify whether you are on track
Why consolidate your pensions?
Traditionally, personal pensions have favoured with-profits funds – low-risk investment funds that pool the policyholders’ premiums. But many of these are now heavily invested in bonds to even out the stock market’s ups and downs, and, unfortunately, this can lead to diluted returns for investors.
It’s vital that you review your existing pensions to assess whether they are still meeting your needs – some with-profits funds may not penalise all investors for withdrawal, so a cost-free exit could be possible.
Focusing on fund performance
Many older plans from pension providers that have been absorbed into other companies have pension funds which are no longer open to new investment, so-called ‘closed funds’. As a result, focusing on fund performance may not be a priority for the fund managers. These old-style pensions often impose higher charges that eat into your money, so it may be advisable to consolidate any investments in these funds into a potentially better performing and cheaper alternative.
Economic and market movements
It’s also worth taking a close look at any investments you may have in managed funds. Most unit-linked pensions are invested in a single managed fund offered by the pension provider and may not be quite as diverse as their name often implies. These funds are mainly equity-based and do not take economic and market movements into account.
Lack of the latest investment techniques
The lack of alternative or more innovative investment funds, especially within with-profits pensions – and often also a lack of the latest investment techniques – mean that your pension fund and your resulting retirement income could be disadvantaged.
Significant equity exposure
Lifestyling is a concept whereby investment risk within a pension is managed according to the length of time to retirement. ‘Lifestyled’ pensions aim to ensure that, in its early years, the pension benefits from significant equity exposure. Then, as you get closer to retirement, risk is gradually reduced to prevent stock market fluctuations reducing the value of your pension. Most old plans do not offer lifestyling – so fund volatility will continue right up to the point you retire. This can be a risky strategy and inappropriate for those approaching retirement.
A PENSION IS A LONG-TERM INVESTMENT. THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.
YOUR PENSION INCOME COULD ALSO BE AFFECTED BY INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.
THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION, WHICH ARE SUBJECT TO CHANGE IN THE FUTURE.
Retirement Planning
The WPS Wealth Group Ltd
Pensions offer a uniquely tax efficient way of saving for your retirement. Whether you are self employed, employed in a small business, a civil servant or an employee of a multinational company it is now clear that it is down to you as an individual to fund for your retirement. The nation’s average life expectancy has increased dramatically in recent years; because more of us are living for longer the cost of providing state pensions and other benefits has also increased dramatically. State benefits will inevitably be diluted within the retired population in the coming years meaning the real value of the state pension will fall over time.
In order to encourage greater participation in pension planning the government introduced Auto Enrolment legislation which came into effect in 2012. By October 2018 every eligible worker employed by a UK company (where an equivalent scheme does not already exist) will be automatically enrolled into a suitable pension scheme and both the employee and employer will make contributions into a personal pension fund. In April 2014 the government also announced sweeping changes to how pension income may be purchased at retirement. Although this recent relaxation of the pension rules is welcome there is now an even greater need for advice given the increased choice now available to pensioners.
- Your independent WPS Wealth adviser can advise you on both pension funding pre retirement and pension income planning at retirement. As well as providing holistic retirement planning your WPS Wealth adviser can also help with more specialist areas of pension advice including –
- Auto Enrolemnt
- Small Self Administered Schemes
- Self Invested Personal Pensions
- Annuity Purchase
- Income Drawdown
- Lifetime Allowance Issues
- At Retirement Options
Due to the complexity of pension legislation a team of WPS Wealth advisers specialise in pension planning completing additional training to remain authorised to the necessary level. More complex pension advice is offered on a face to face basis, to arrange a free initial review CLICK HERE.
CHOICE OF SERVICE PROPOSITION
In order to maintain independence your WPS Wealth adviser will provide you with a fee based service for the face to face advice provided. The level of fees levied for the services we offer will depend on the service level you require both initially and on an ongoing basis. Your WPS Wealth adviser will offer you a range of services levels which will always be agreed in advance so there are no nasty surprises further down the line. Alternatively WPS Wealth also offer a remote advice and self-select service through WPS Moneymappers Ltd. For more information on this service .
Contact WPS
Recent Comments