Malvern Living Jul - Aug 2022

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FINANCIAL PLANNING FOR A HAPPY RETIREMENT The secret to a successful retirement is to slowly and surely build up your retirement pot. Exactly how you do that will depend on your situation – but there are lots of things you can do. Here we have advice from Money Helper (moneyhelper.org.uk) which is a government advice service. As with any financial planning matter, it is important that your unique circumstances are considered and you seek the advice of a certified professional. REVIEW PENSIONS REGULARLY It’s important to review your pensions regularly. If they’re not on track to give you the income you want in retirement, you need to look at how to boost them. If they’re broadly on track, you can make a clearer plan so that your pensions will be able to give you the income you want when you retire. REVIEW THE WAY YOUR PENSION POT IS INVESTED If you have a defined contribution personal or workplace pension, you get to choose how your pension pot is invested. Typically, this involves choosing from a range of funds offered by your pension provider. These funds will be weighted differently between various types of assets, which offer different levels of risk and potential return. Generally, you can afford to take more risk when you’re young, and less as you get older. The longer your money will be invested, the more scope you’ll have to deal with investment performance going up and down over time. So if you are some way from retirement and your pension savings are invested conservatively, you might want to consider moving at least some of your fund into potentially higher-growth assets, for example, company shares. But bear in mind that there’s no guarantee that higher growth will be achieved. Transferring a personal pension into a self-invested personal pension (SIPP) can give you a wider range of investment options to choose from. But this brings higher risks if you’re not an experienced investor. And you might face higher charges. Unless you understand how the different pension investments work, you might want to consider getting regulated financial advice before making any changes to your pension investment. REVIEW THE CHARGES DEDUCTED FROM YOUR SAVINGS All pension providers will charge for managing your pot and investing your money. In defined contribution personal and workplace schemes, these charges are often called an annual management charge or ongoing charge figure and are automatically deducted from your pot. An annual charge of 1.5% a year could have eaten away a quarter of your pension pot after 35 years. An annual charge of 0.5% would have reduced your pension pot by only 1/10th over the same period. You don’t need to worry about this if you’re in a defined benefit scheme. But if you have a defined contribution scheme, charges reduce the value of your pension pot. Workplace pensions often have lower charges but that isn’t always the case. HOW MUCH MONEY WILL YOU NEED IN YOUR TOTAL PENSION POT? It’s important to think about your pension income in building blocks - first with the state pension, then with your private or workplace pension savings, and then with any other additional income you might get, from investments or property. How much extra income you need to generate from your private pension savings will depend on the type of private pension you have. Defined benefit and final salary pensions pay you a regular monthly income - how much you get is based on your earnings while you were working. If you have one or more of these, you should receive annual updates telling you how much you can expect to get. Adding that to your state pension (which you can find out by getting a state pension forecast) will help you understand how much you’ve got to play with in retirement. If you have any confusion surrounding multiple pension pots, investments or other pension queries, it is worthwhile seeking the advice from an IFA. 28 | www.minervamagazines.co.uk
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Malvern Living Jul - Aug 2022

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