Shopping around for the most cost-effective car insurance has become second nature to most of us as we scour the internet each year to find the best option available. So why do most of us feel ok about setting up a pension but then leave it when it’s set up to ‘take care of itself’?
A pension is the biggest commitment we’ll make – it’s our 50 year investment . It will provide an income for a time when we can hopefully enjoy life without the need to work. But it’s important you know how much you’re paying for the day to day running of your pension, to make sure that your investment choices still meet your retirement needs and that these costs aren’t eating away at your investments. If you’re not careful these costs can significantly increase without you realising.
Here’s an example of the negative effect of higher pension costs and poor fund performance:
A 35 year old with a £10,000 pension pot invests until they’re 65 years old
| Investment type | Funds | Funds |
| Investment amount | £10,000 | £10,000 |
| Annual Investment growth | 5% | 7% |
| Charges per year | 2% | 1.5% |
| Pension pot at retirement | £23,720 | £48,541 |
Source: http://www.which.co.uk/money/retirement/guides/should-i-consolidate-my-pensions/
Investing in a modern pension policy could more than double the potential growth of your investment. With all investments a better return is never guaranteed, but a wide choice of investment options and lower administration charges are the best chance of achieving one.
Taking advantage of lower charges and better investments is great, but you need to make sure that leaving your existing provider is the right choice for you and your pension. It’s important you ask yourself these five questions:
- What are my objectives, and do my investments still meet them in terms of performance?
- Do my contributions still meet my objectives or do they need to be increased?
- What am I being charged by my current provider, can I get the same service elsewhere at a more competitive rate?
- Are there any transfer out and/or exit costs to leave my existing provider?
- If I decided to transfer to another provider would I lose any pension benefits?
It’s important to take the time to review your pensions, not only in terms of performance to make sure that they still meet your objectives, but equally important are the ongoing and annual pension charges. Paying over the odds for the day to day administration of your pension could have a significant impact on your retirement pot.
Do you know what pensions are available? Find out about the different types of pension available. Before you make any decisions about opening or transferring your pension why not take a look at our Pension Transfer Checkpoint.
The investments made within a pension can fall as well as rise and you may end up with a fund at retirement that’s worth less than you invested. You can normally only access the money from age 55.
Prior to making any decision about the suitability of a pension, or transferring any existing pension plan(s) into another pension like a SIPP you should seek the advice of a suitably qualified financial adviser.
During the transfer process there is a period of time you will not have access to your assets while the transfer is being completed.
Please note the tax treatment of these products depends on the individual circumstances of each customer and may be subject to change in future.
The post Should you be reviewing your pension? appeared first on News and Views.