Probing pension questions to test your strategy

Lots of our users have seen a need to revise their retirement plans in recent months, and we know it remains on the to-do lists of many. Ask yourself these probing pension questions to see what you could be doing to enhance your financial position and get greater peace of mind.

1. Does your risk-profile require review?

Your time-horizon has a huge effect on portfolio composition. Its effect on risk-profile means the asset allocation of your pension investments is likely to change significantly over time.

It may be that your risk-profile needs to be revisited in light of the changed landscape. The volatility of recent months has caused many individuals to question their appetite for risk, particularly those fearing downturns at the point where they need to access significant funds. Your psychological comfort is hugely important too.

Your risk parameters may need significant revision down; on the flipside, the overly cautious may not be taking on sufficient risk to achieve their goals

Your risk parameters may need significant revision down; on the flipside, the overly cautious may not be taking on sufficient risk to achieve their goals. Risk-profiles are notoriously difficult to self-assess, and are both a science and an art. Your first professional assessment – or a second opinion – can be a very illuminating exercise. Why not let us set some initial conversations up?

2. Do you need cash flow modelling for clarity?

Many people across age groups feel like the crisis has thrown their retirement plans into disarray. The answer may lie in cash flow modelling. This requires complex calculations, but can be an invaluable means of getting real clarity about where you are on your retirement roadmap and what kind of wealth expectations are reasonable.

As this #WealthGoals case study illustrates, cash flow modelling allows for best and worst case scenarios to be planned for, cushioning both the financial and psychological impact of any shocks.

Cash flow modelling allows for best and worst case scenarios to be planned for, cushioning both the financial and psychological impact of any shocks

Pension planning is one of the most complex elements of wealth management because of the tax complexities, ever-changing allowances and other variables involved. Their broad expertise means wealth managers can help optimise pensions in many ways as part of a holistic plan.

3. Could you plough more money into your pot?

The UK’s wealthiest 20% will have trimmed their spending by a mammoth £23bn over lockdown to the middle of June1. The £15bn cut from holidays/accommodation, travel/transport, and eating/drinking, highlights just how far lifestyles have been curtailed. But this does also represent a golden opportunity to increase retirement savings for many people – and even modest increases can make a huge difference.
Cashflow modelling will reveal the impact increased contributions could have on your lifestyle in retirement – and highlight any shortfalls that need to be addressed
Achieving reasonable growth, someone in their mid-forties saving an additional £250 a month could reap the reward of an extra £100,000 in their pension pot at 65. It is never too late to turbo-charge your pension savings, however. Cashflow modelling will reveal the impact increased contributions could have on your lifestyle in retirement – and highlight any shortfalls that need to be addressed.

4. Do you have a plan for drip-feeding money in?

Many see significant volatility ahead and a retesting of market lows that may again generate attractive buying opportunities in the near term. If you have decided to increase pension contributions then there could be real potential to supercharge your pot.

The key is to be opportunistic, but still strategic, the experts say. The wealth managers on our panel have highlighted the importance of disciplined plans to drip-feed money into the markets at regular intervals, so that emotion can be taken out of the equation.

The wealth managers on our panel have highlighted the importance of disciplined plans to drip-feed money into the markets at regular intervals, so that emotion can be taken out of the equation

They also emphasise that buying must be highly selective. Indiscriminate buying when markets are frothy is a costly and common mistake. Take advice to see where you could usefully increase exposure.

Light bulb

Top Tip

The importance of retirement security cannot be overstated. With life expectancy lengthening and care fees rocketing, the prospect of running out of money haunts even the quite wealthy. Don’t let the emotiveness of the issue get the better of you, however. Note down any points this piece brings up and have a no-obligation discussion with an expert.

Lee Goggin - Co-Founder

Lee Goggin

Co-Founder

5. Could you turn the dial even slightly on performance or fees?

There may be investment opportunities to exploit, but maximising growth depends on also turning the dial in your favour on performance and fees. 

Even seemingly small differences in either can compound to make a huge difference over time, so always shave off what you can from fees and seek boosted performance. 

Even seemingly small differences in either can compound to make a huge difference over time, so always shave off what you can from fees and seek boosted performance

Our wealth manager selection process allows you to compare factual matches side-by-side for ease of comparison, putting you in a much stronger position for negotiation. Use our Knowledge Centre to get up to speed fast. 

6. Am I being as tax-efficient as possible?

Tax mitigation is where things get complex, but it is also where significant savings can – quite legitimately – be made. Investing via tax-wrappers like SIPPs and ISAs is just the beginning of the moves you should make to maximise your retirement savings, although navigating allowances can be a minefield.

Care over how you hold investments, the precise investments that you choose and maximising any allowances you have are vital moves too. It is unwise to attempt any sophisticated tax planning without taking professional advice, but with it you may find several ways to boost your pension pot.

It is unwise to attempt any sophisticated tax planning without taking professional advice, but with it you may find several ways to boost your pension pot

Opportunities to pass wealth through the generations more tax-efficiently can also be created through pension structures.

7. Will unpaid National Insurance reduce your income?

Your state pension may only be a small part of your retirement funds, but you should certainly take action to ensure you receive the full amount. 

Only 44% of retirees now end up receiving the full state pension since rule changes affecting National Insurance (NI) contributions came into effect in 20162. It is thought that three-quarters of retirees are ending up with less than three-quarters of the new state pension.

It is thought that three-quarters of retirees are ending up with less than three-quarters of the new state pension

Often punished are those who have been contracted out for some of the required 35-year payment period (often senior public sector workers). Married women who were hoping to receive a top-up through their spouse’s pension should also note that the new pension is based solely on an individual’s NI contributions.

It is often possible to top up by paying in voluntary NI contributions and so receive the full pension amount, so seek advice to see if this would be worthwhile for you.

Does your pension need a makeover?

Our pension pots are among our most important financial assets, and they should be tended to as such. All too often though, they tend to be slightly neglected.

Making sure that your strategy continues to precisely reflect your risk-profile and objectives is an ongoing task and where wealth managers can add significant value. Complex planning scenarios taking in investments, tax and more are where they excel.

If asking yourself these pension questions has raised any questions or concerns, please don’t hesitate to get in touch with our expert team. Or, use our matching tool to have a free consultation set up right away.

1 According to figures from the New Policy Institute
2 Department for Work and Pensions, 2020

Find Your Wealth's Paradise

We make the best advisors easy for you to access

Start Now

Find Your Wealth's Paradise

We make the best advisors easy for you to access

Start Now