Why you should review your pension
There are many reasons why you might want to have a look at your current pension or pensions.
I’ve worked in the pension space for many years and yes elements of pensions can be complicated, especially for example Final Salary type schemes. An interesting recent aspect is that for the last year final salary transfer values are at a very high level, which is obviously encouraging some to transfer out.
But the basics are not rocket science and rest more with common sense, when added to the relevant technical information you do need before making any decision.
Many people have pensions and funds they have forgotten about or left alone from past employers or periods in their past
A review can help to uncover or find these and ascertain if their current format is working efficiently for you, especially as time has moved on and your circumstances will have changed.
Are you fully aware of?
Changes in rules that can affect your pension pot or provide different flexibility or options
Now those over 55 have greater freedoms with their pension
Some old legacy pensions still have hidden charges and charges can eat away at your pension
Are you aware of the charges applied to your pot and how these impact your funds
Have you looked at your investment performance and strategy in the last few years
In periods of low cash or investment returns, original projections may now be well below forecasts
Inflation, even when low, munches that pension
Do you know how much income your projected pensions will give you in real term value
Changing life circumstances may have altered what you need in terms of other pension benefits
And anyway- some obvious reasons!
• You will be getting older, even if you’re younger now (we all thought we were invincible in our 20’s or didn’t really care so much)…
• It’s simply sensible
• You should be doing this periodically – probably at least every 3 years
• Everything changes over time
• Penny-wise pound foolish isn’t a good option
Damn, I wish I was 25 again!
Warning though, much of the above thoughts are more directed at Money Purchase pensions as opposed to Defined Benefit (DB) or Final Salary as they are called. This is not to say don’t review a DB pension, just be careful if you’re considering transferring one – they are more complicated and have guaranteed benefits you should be made aware of. The “critical yield”, albeit very important, is just one factor….