As we move through our working life, almost inevitably we can build up a collection of pensions from previous employers and self-employment, amounting to significant six figure sums, but do you need to take any specific action with these pensions?
Too often, we see advice centred around simplifying and consolidating all your disparate arrangements, which looks of questionable value to the pension holder and they may well have been better served simply retaining their existing pension arrangements.
But there can be some genuine reasons why you ought to act. Here are…
5 reasons why you should review your existing pensions now:
1. Access – Don’t assume that all pension arrangements offer all the current “pension freedoms” i.e. the option to flexibly access your pension from the age of 55, specifically this can involve extracting some/all of your tax-free cash for “lifestyle” spending purposes or the option to just draw a small portion of any existing pension. It is not compulsory for schemes to offer this, many don’t and are unlikely to offer this in the future.
2. Charges – Do you know the total cost of running your pensions? Some large Employers can offer incredibly cheap and good value schemes, unfortunately, many other plans are simply way too expensive when contrasted with current offerings.
3. Death Benefits – If your pension scheme doesn’t offer pension freedoms, its highly likely the death benefits options could be very tax inefficient. One of the major attractions of the new pensions regime is the ability to make pensions multi-generational i.e. pensions can now be enjoyed by children, grandchildren etc…and with these benefits remaining outside of your estate for Inheritance Tax purposes.
4. Default Investment Funds – Do you know what and where your pension funds are invested? Does it match with when and how you intend to start drawing these pensions? Are you in a default “lifestyling” investment fund which is targeting a specific retirement date and most likely, the purchase of an annuity at that time? Is that what you are likely to be doing in the future?
5. Investment choice – With the cost of investing having fallen dramatically in the UK over the last few years, do you have a good choice of competitively priced investment funds to select from? Can you select funds which better suit your intended work and retirement path?
If you have a question about pension planning, please call us on 01825 76 33 66 or send us an email via the contact form.