The benefits of pension advice
Lots of us put off reviewing our pensions, either because they seem too complicated, or because we’re too busy focusing on other things. The good news is that there’s plenty of expert help available if you’re not sure how much you should be saving and where, or what to do with your pension when you retire. If you’re aged 55 or over, you can get free guidance from the government service Pension Wise. The service provides help over the phone or face to face, with everyone entitled to one free session on what they can do with their pension pot, how to shop around, and what to look out for with taxes and fees. However, if you want advice and recommendations that are specifically tailored to your individual circumstances, you’ll need help from a professional financial adviser.
Why get pension advice?
One of the main issues with pensions is that lots of us start paying into pension plans when we’re younger, but then fail to check on how our retirement savings are doing. David Hancock, pensions adviser at Profile Pensions, says: “For example, if you took out a pension with a financial adviser in the 1980s or 90s through a bank and that bank now no longer provides advice, nobody’s going to contact you to give you ongoing reviews. Pensions are often seen as being so far in the future that people often forget about them, particularly if no-one is actively there to help them and give them continuing support. “Reviewing your pension is important for lots of reasons, but one of the main ones is to help you work out whether you’re paying in enough. People often need someone to tell them they need to increase the amount they’re paying in, or that they’re on the right track.”
Pension advice matters
Getting an adviser to review your retirement savings and investigate whether making changes could improve your pension could make a real difference to the amount you end up with at retirement. “For example, there are lots of reasons why customers may be better off if they switch a pension,” says Hancock. “One is consolidation, so if they’ve got more than one pension they might find it easier to manage them if they’re all transferred into the same pot.” Transferring your pension could also reduce the amount you pay in charges. Pension fees have changed over time, so pensions tend to be cheaper nowadays and people can often save money by moving them into a different plan. In addition, lots of older pensions are closed plans, so customers can no longer make contributions. Switching to another plan may enable you to top up your retirement savings so that hopefully you may end up with a bigger pension pot at retirement. Hancock says: “Some people may also be in an underperforming pension fund or they may be invested somewhere that’s very high risk that they weren’t aware of. We give an ongoing advice service to check that their pension is performing in line with their expectations.” Of course, there will be many cases when transferring a pension may not be appropriate, for example, if you have a final salary scheme, and would lose out on a guaranteed level of pension in the future. Some pensions may also charge steep exit penalties which may outweigh the benefits of transferring, which is why seeking professional advice is so important. An adviser can also discuss your options at retirement, and the best ways to take an income from your pension. “Three years ago, there were some quite dramatic changes to how people could draw money out of their pension,” explains Hancock. “The majority of pensions out there aren’t as flexible as they might be, so customers may have a limited choice when it comes to drawing money from their pensions. When we explain to them what the new options are, most people decide to go for a pension which offers these because it puts them in control of exactly when and how much they take.” For further information on the benefits of pension advice, you can call Profile Pensions on 01772 804 404 or contact us.