Time for a fresh look

The Wokingham Paper - - NEWS - With Tim Em­ble­ton from Time Fi­nan­cial Plan­ning

Many of us make New Year’s res­o­lu­tions with the best in­ten­tions only to find they fall by the way­side af­ter a few weeks. But if there’s one res­o­lu­tion worth mak­ing and stick­ing to, it’s tak­ing a fresh look at your fi­nances to en­sure every­thing’s in or­der for the com­ing year. From my ex­pe­ri­ence, when my clients get around to do­ing this some are pleas­antly sur­prised to dis­cover they have more money than they thought, mean­ing they can ad­just their plans ac­cord­ingly. Through­out Jan­uary I’ll be ex­am­in­ing what might need at­ten­tion on how you can fix it, start­ing with pen­sions. I fre­quently come across peo­ple with four or five pen­sion pots col­lected over their work­ing life­time but be­cause the in­di­vid­ual sums are not huge the an­nual state­ments are of­ten thrown in a draw with­out a se­cond thought. Yet if the pots were amal­ga­mated into one lump sum, many peo­ple would sit up and take a lot more no­tice about what they’ve got and how it’s be­ing in­vested. I re­cently spoke to a prospec­tive client who had mul­ti­ple pen­sion plans – two from her cur­rent em­ployer, two from pre­vi­ous em­ploy­ers, a per­sonal pen­sion she’d set up some years ago and an­other per­sonal pen­sion where she’d been en­cour­aged to con­tract out of the State Earn­ings-Re­lated Pen­sion Scheme (SERPS). She was con­cerned about be­ing able to af­ford to re­tire in 10 years, at the age of 65. What we were quickly able to show her was that the wealth she’d ac­cu­mu­lated in those pen­sions to­gether with the money in her ISAs and a Gen­eral In­vest­ment Ac­count (GIA) was go­ing to be enough for her to be able to re­tire at the age of 60 in­stead. An­other is­sue this lady had was that she’d been en­cour­aged to trans­fer out of the State Earn­ingsRe­lated Pen­sion Scheme (SERPS) and she was con­cerned this had been mis-sold to her and that she’d end up with very lit­tle State Pen­sion and a per­sonal pen­sion pot that had very lit­tle value to it. But what we were able to show her was that she was el­i­gi­ble for a full ba­sic State Pen­sion and that the pen­sion pot was worth far more than she thought so in the end that should com­pen­sate her for the fact that she was con­tracted out of SERPS. She also wanted to take her 25% tax free cash and use draw­down for the rest of the pots rather than buy an an­nu­ity be­cause she’d heard so many bad things about them. But it was clear that based on the types of con­tracts she had draw­down was un­likely to be avail­able with some of them and it would make sense to con­sol­i­date these into a com­pletely new pot that de­liv­ered the flex­i­bil­ity she needed. This type of sce­nario is ex­tremely com­mon­place as a re­sult of peo­ple chang­ing jobs and em­ploy­ers far more fre­quently than they used to. I once came across a client who had 37 poli­cies – imag­ine that! This was an ex­treme case, but I think it ham­mers home the point that it’s very dif­fi­cult for some peo­ple to com­pre­hend how much money they’ve got when it’s all spread around in var­i­ous dif­fer­ent places. When it comes to con­sol­i­dat­ing your wealth there are sev­eral ad­van­tages, the first be­ing that it brings sim­plic­ity and trans­parency so you can see what you’ve got in one place. You can then adopt a com­mon in­vest­ment strat­egy and risk pro­file across the en­tire pot rather than hav­ing po­ten­tially sev­eral dif­fer­ent risk pro­files. You can also in­tro­duce all the fea­tures you’d need from a pen­sions free­doms point of view. An­other ad­van­tage is that in many cases consolidation also al­lows you to re­duce the over­all charges you’re pay­ing. It pays to be aware of the po­ten­tial draw­backs of consolidation as well. You’ve got to con­sider whether your ex­ist­ing pen­sions have got exit penal­ties, the cost of the ad­vice you’re be­ing given and the fact that some of your pen­sions may have built in guar­an­tees which would be lost if they were trans­ferred. So it’s re­ally im­por­tant for some­body to take ad­vice be­fore mak­ing changes rather than just try­ing to plough on and do it them­selves. Next week we’ll look at how to tackle the mul­ti­ple in­vest­ment pots you’ve col­lected. TIM EM­BLE­TON Got a fi­nan­cial ques­tion you want Tim to an­swer? You can email him at [email protected]­ited A PEN­SION IS A LONG TERM IN­VEST­MENT. THE FUND VALUE MAY FLUC­TU­ATE AND CAN GO DOWN. YOUR EVEN­TUAL IN­COME MAY DE­PEND UPON THE SIZE OF THE FUND AT RE­TIRE­MENT, FU­TURE IN­TER­ESTS AND TAX LEG­IS­LA­TION Time Fi­nan­cial Plan­ning Lim­ited is an ap­pointed rep­re­sen­ta­tive of The Whitechurch Net­work Lim­ited which is au­tho­rised and reg­u­lated by the Fi­nan­cial Con­duct Au­thor­ity.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.