Checking and comparing the historic performance of your pension investments is a critical step in financial planning for several reasons. It helps ensure your investments are on track to meet your retirement goals, assess risk, and make informed adjustments.
Here are some key reasons why this is important:
Tracking Growth: Historical performance shows how your investments have grown over time. This helps you determine whether your portfolio is meeting the required returns to achieve your desired retirement income.
Benchmarking: Comparing your investments to relevant benchmarks (e.g., stock indices, bond performance) helps you determine whether your funds are performing as expected or lagging behind.
Switching Funds: If a particular fund or investment consistently underperforms, you might consider reallocating to better-performing options.
Realignment: If the performance is consistently below expectations, you may need to adjust your contributions, choose different funds, or delay retirement plans.
Inflation Considerations: Historical data helps you evaluate whether your returns are outpacing inflation, ensuring your retirement savings retain their purchasing power.
Risk Tolerance Alignment: Comparing historical performance allows you to see how your investments perform in various market conditions. This helps ensure they align with your risk tolerance.
Balanced Portfolio: Historical performance allows you to assess whether your portfolio is well-diversified across asset classes, sectors, and geographical regions.
Regularly checking and comparing the historical performance of your pension investments ensures you’re informed, prepared, and proactive in managing your retirement savings. It helps you identify underperforming investments, measure progress toward your goals, and make timely adjustments to maximize your pension’s value. By leveraging this data, you can build a more secure financial future.
Check what annual, platform and fund management fees you're paying. Are you getting value for money?
High platform and management charges can significantly affect your pension fund over the long term. These charges reduce the amount of your contributions that are invested and can erode your returns over time due to the compounding effect of fees.
Over time, even seemingly small differences in fees can have a substantial impact on the value of your pension fund due to the compounding effect.
Here's an example:
You invest £10,000 annually for 30 years.
The investment grows at an average annual return of 6% before charges.
Two scenarios: one with charges of 0.5% and another with charges of 1.5%.
Scenario 1: Low Charges (0.5%):
After 30 years, your pension fund grows to approximately £742,000.
Scenario 2: High Charges (1.5%)
After 30 years, your pension fund grows to approximately £588,000.
Difference: You lose around £154,000, or over 20% of your total pension value, due to higher charges.
Check how much investment risk you're taking. You might want to take more, or less risk, or invest in different markets.
Knowing where your money is invested is critical for achieving financial security, aligning your investments with your values and goals, and managing risks effectively. Here are some key reasons why this is important:
Long-Term Objectives: Different types of investments (e.g., stocks, bonds, property) serve different purposes. Knowing where your money is invested helps ensure your portfolio is structured to meet your goals, whether that’s retirement, buying a house, or building wealth.
Time Horizon: Certain investments are better suited for short, medium, or long-term goals. For example:
-Stocks are more suitable for long-term growth.
-Bonds or cash investments might be better for short-term needs.
Return Expectations: Understanding where your money is invested allows you to gauge potential returns and assess whether your investments are likely to deliver the growth or income you need.
Diversification: Knowing the specific assets in your portfolio ensures your money is spread across different investments, sectors, and regions. Diversification minimizes risk by reducing exposure to a single underperforming area.
Risk Tolerance: Some investments are riskier than others (e.g., stocks vs. government bonds). Being aware of your investment allocation helps ensure it aligns with your risk appetite.
Changing Goals: As your life circumstances change (e.g., marriage, children, or nearing retirement), your investment priorities may shift. Knowing where your money is invested helps you make adjustments.
Understanding where your money is invested is fundamental to achieving your financial goals, managing risks, and ensuring your investments align with your values and priorities. By regularly reviewing your portfolio, staying informed about your investments, and seeking professional advice when necessary, you can maximize returns, minimize risks, and build a secure financial future.
Are you looking to consolidate your old workplace pensions into one pot? Let's discuss the pros and cons.
Fewer Accounts to Monitor: Consolidating your pensions means you only need to track one provider and one scheme, reducing administrative hassle.
Easier Planning: A single pension pot provides a clearer overview of your retirement savings, making it easier to calculate how much more you need to save or adjust your investment strategy.
Avoid Duplicate Costs: If you have multiple pots, you might be paying separate platform or management charges for each. Consolidating eliminates these duplicate costs.
Customization: A consolidated pension allows you to tailor your portfolio to suit your risk tolerance, time horizon, and personal goals.
Streamlined Drawdown: When you retire, managing income through a single pension pot is simpler and more efficient than juggling multiple accounts.
Guaranteed Annuities: Older pensions may come with valuable benefits, such as guaranteed annuity rates or final salary schemes. Moving these pensions could mean forfeiting these perks.
Protected Tax-Free Cash: Some pensions allow you to take more than 25% as a tax-free lump sum. Consolidation might result in the loss of this protection.
Pension consolidation can simplify management, reduce costs, and provide access to better investment options, making it an attractive option for many people. However, it’s essential to weigh the potential loss of benefits, exit fees, and other risks before making a decision. Consulting a financial advisor is highly recommended to ensure you make an informed choice tailored to your personal circumstances.
We can forecast your retirement income with cash flow modelling to help you choose when to retire.
Cash flow modelling is a financial planning tool that projects your future income, expenses, and asset values over time. It is especially valuable for managing pension income, as it provides a clear and realistic picture of your financial future. Here are the key benefits of using cash flow modelling for pension income:
Visual Representation: Cash flow modelling provides a graphical or tabular projection of your income, expenses, and investments over time, making it easier to understand your financial situation.
Informed Decisions: By visualizing how your pension income supports your lifestyle, you can confidently make decisions about spending, saving, or adjusting investments.
Avoiding Overspending: Cash flow modelling ensures you withdraw sustainable amounts from your pension, avoiding the risk of depleting your funds too early.
Realistic Projections: Cash flow modelling incorporates inflation adjustments, ensuring that your future income projections reflect rising costs of living.
Bridging the Gap: If a shortfall is identified, you can explore solutions such as delaying retirement, increasing savings, or adjusting withdrawal rates.
Adapting to Life Changes: It allows you to adjust your plan in response to significant events, such as health changes, inheritance, or market fluctuations.
Efficient Drawdown: Cash flow modelling can suggest strategies for withdrawing income from different sources (e.g., ISAs, pensions) to maximize tax efficiency.
Cash flow modelling is an invaluable tool for managing pension income, as it provides clarity, ensures sustainability, and enables proactive planning. By understanding your financial future in detail, you can make informed decisions, optimize your retirement strategy, and achieve peace of mind. Consulting a financial advisor who specializes in cash flow modelling can help tailor the projections to your unique needs and goals.
Our advisers can show you the most tax efficient way to draw your pension income & discuss annuities.
Pension drawdown allows you to take income flexibly from your pension pot during retirement, keeping the remaining funds invested. Reviewing your drawdown options regularly is essential to ensure that your retirement strategy remains sustainable and suited to your evolving financial needs and circumstances.
Withdrawal Flexibility: Reviewing your drawdown options allows you to reassess whether flexible or fixed withdrawals are better suited to your current needs.
The choice between Flexi-Access Drawdown (FAD) and Uncrystallised funds pension lump sums (UFPLS) depends on your personal circumstances and goals:
FAD Might Be Better If:
You want to take a large tax-free lump sum upfront (e.g., 25% of your pension pot).
You value flexibility in controlling the timing and size of withdrawals.
You have a larger pension pot and want to leave a legacy for beneficiaries.
You are comfortable with investment risk and ongoing fees.
UFPLS Might Be Better If:
Your pension provider does not offer FAD, and you prefer to avoid transferring your pot.
You don’t need a large tax-free lump sum and prefer to access funds gradually.
You have a smaller pension pot and want a simpler, lower-cost solution.
You’re taking small, infrequent withdrawals and want to avoid the complexity of setting up a drawdown plan.
Annuities: Reviewing your drawdown options allows you to assess whether purchasing an annuity (guaranteed income for life) with part of your pension might provide financial stability.
A Blended Approach: Combining drawdown with other products, such as an annuity or cash savings, may better suit your needs as circumstances change.
Reviewing your pension drawdown options is vital for maintaining a sustainable income, adapting to changing circumstances, and ensuring tax efficiency. It allows you to respond proactively to market conditions, inflation, and legislative changes, while also helping you achieve your long-term financial and legacy goals. For tailored advice, consider consulting a financial advisor to ensure your drawdown strategy remains aligned with your needs and objectives.
A professional pension review is a fantastic opportunity to learn more about your retirement fund, so take us up on our offer of a free detailed report.
Once you’ve decided to learn more about your existing pension arrangements you just need to schedule a call with us. If you haven’t already, follow the instructions on the website to register.
Our secure portal enables us to securely communicate and share information with each other throughout the entire financial planning process, with total privacy.
Once we’ve received your information back from the existing providers we will prepare the report and then contact you to book in a video call. This is a longer meeting, typically an hour.
Once our recommendation report is ready, we will email it to you in advance of the presentation meeting. We will also provide you with a detailed “Financial Overview” report.
If you are happy to proceed, and you are clear on our fee structure, our advice will be implemented. Sutherland Financial Planning will then become your appointed Financial Adviser for the funds.
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