Dunn Talking

Welcome to Senior Mortgage and Protection Adviser Kevin Dunn’s personal finance column, Dunn Talking. Kevin’s from Furnley House, an Independent Financial Planner and Mortgage Broker. This month, he’s handing over to Neil Haley, a Financial Adviser at Fur

Approaching Retirement? You may want to check your pension value.

Those approaching retirement are likely to have been checking the value of their pensions and some people may have seen the value of their investments fall. A drop in value of pensions before retirement can be concerning, especially at a time when the cost of living continues to rise.

Why has my pension value fallen?

A pension is just a wrapper around an investment portfolio. It provides tax advantages and is governed by rules on how the money can be withdrawn. Pension values rise and fall as the stock market goes up and down. Money held in pensions over the last decade has generally performed well, but the past few years have certainly been more volatile.

Previously, pensions may have something called a ‘lifestyling’ option. This meant that as you approached your chosen retirement age, the investment funds held in your pension were automatically switched into more cautious fund choices.

Having a lifestyling option sounds like a good idea, but it was designed in an era when most people used their pension to buy an annuity which provides a guaranteed income for life.

However, the majority of people now choose a different way to fund their retirement and keep their money invested. For these people, the lifestyling route may reduce the return you could expect to receive.

Since the introduction of pension freedom reforms in 2015, many pension providers have moved away from lifestyling, believing that ‘staying invested’ is a better option for most people than de-risking.

If you are close to retirement and your pension value has fluctuated in value, it is likely that you do not have the lifestyling option. Unless you are planning to buy an annuity, then a small fall in the value of your pension fund may not be a concern.

What can I do to better take control of my pension and retirement plans?

Many people don’t fully understand what they hold in pensions, how they work or if they have enough saved. A financial adviser can review your pensions and help you make changes if needed. They can also explain your choices at retirement, so you make an informed choice on how best to draw a retirement income.

Call Furnley House on 0116 269 6311 or email info@furnleyhouse.co.uk.

Past performance is not a reliable indicator of future performance.

The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

All information correct at time of writing.