According to recent research by Bestinvest there are no less than 113 'dog' pension funds (over £2.5 million in size) that are serial underachievers. The total amount invested in them is £31 billion! Their underachievement is likely to have a serious impact on their owners' retirement plans. Whilst I have some sympathy, everyone should have realised by now that financial planning is a process and not an event, so you need to regularly review your pension funds and the amount that you're putting aside each month/year or you could find yourself 'enjoying' a retirement on the breadline.
To give an example, even 3% underperformance each year can make a huge difference. A simple example may help. Let's say you put £20,000 into a pension today anticipating your retirement in 25 years' time and that you have an adventurous attitude towards risk. You might expect to achieve a 9% per annum return on your money which (ignoring charges for the sake of simplicity) would result in a fund of £215,570 when you retire. If you had picked one of the dogs, however, your pension fund would only have grown to £107,297, so you'd receive LESS THAN HALF the pension you might reasonably have hoped for!!
Do you have any dogs in your pension investments? Unless they are professionally reviewed on an annual basis it's highly likely that you do, so get them checked out now.
Showing posts with label pensions. Show all posts
Showing posts with label pensions. Show all posts
Monday, 28 October 2013
Friday, 4 January 2013
A New Year = A New Dawn for financial advice in the UK
Jan 1st, 2013 marked the beginning of a new era for financial advice, particularly in the areas of investments, pensions and general planning. It's called the Retail Distribution Review (RDR). As a result of the RDR it is no longer possible for advisers to receive commission on new investments or pension plans (including top-ups) so you need to be prepared to pay a fee for the advice - either directly or indirectly (some, but by no means all, providers will facilitate fees being paid out of the capital that you invest with them, if you prefer it that way).
Fees will be explicit i.e. you'll know exactly what your adviser is being paid and what you can expect in return, both initially and on an ongoing basis. You may be tempted to pay for the initial advice and save money by not agreeing an ongoing review aervice but this may be an expensive mistake, unless you are expecting your circumstances never to change, nor your attitude towards investment risk, nor global economic conditions, nor the managers who look after your money on a day-to-day basis etc.
That said, most people do not need to see their adviser more than once or twice a year. Your own adviser will be able to explain what review services they are offering and how much they'll cost you. If you are unhappy you can always vote with your feet and pay the fees to another firm instead.
One final point - paying your adviser a fee shouldn't increase your overall costs - they would previously have been paid commission which came out of the charges made on your investment/pension. Those charges should now reduce as the providers are no longer (without your express permission) paying the adviser, although you shopuld be aware that many providers intend to keep that money for themselves - a shameful policy imho and perhaps a good reason to take your savings elsewhere?
Fees will be explicit i.e. you'll know exactly what your adviser is being paid and what you can expect in return, both initially and on an ongoing basis. You may be tempted to pay for the initial advice and save money by not agreeing an ongoing review aervice but this may be an expensive mistake, unless you are expecting your circumstances never to change, nor your attitude towards investment risk, nor global economic conditions, nor the managers who look after your money on a day-to-day basis etc.
That said, most people do not need to see their adviser more than once or twice a year. Your own adviser will be able to explain what review services they are offering and how much they'll cost you. If you are unhappy you can always vote with your feet and pay the fees to another firm instead.
One final point - paying your adviser a fee shouldn't increase your overall costs - they would previously have been paid commission which came out of the charges made on your investment/pension. Those charges should now reduce as the providers are no longer (without your express permission) paying the adviser, although you shopuld be aware that many providers intend to keep that money for themselves - a shameful policy imho and perhaps a good reason to take your savings elsewhere?
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