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January 17, 2022

Keeping an eye on your pension


in Financial Planning Insights

Remember when you joined your first (and subsequent) employee group pension scheme!

Well maybe you can’t remember exactly – but you know which funds you selected your hard-earned money to be invested in, don’t you? 😃

If you can – give yourself a big pat on the back, because you make up only 13% of the population. The other 87% are a little in the dark! And being in the dark for something this important can be devastating for your retirement income.

The following is a real example from a new client who approached us for help with their pension planning – and it shows in stark terms what happens if you don’t keep an eye on where your money is invested:

What makes this example more worrying is that the client has a pretty good knowledge around investing – they have always been diligent with their savings and have built up a portfolio of stocks and shares ISAs over the years. They understand about risk and have always taken the view that when they are investing for the long term, they are comfortable taking more risk.

So, what has happened with this pension?

The client selected to invest in the lowest risk fund possible when they were only 21. Their only explanation is that at such a young age, they were ‘clueless’ about pensions and investments and must have thought high risk was a bad idea.

Inertia has enabled this pension to tick along in the background, which as statistics show, is perfectly normal. They falsely believed all their pensions were invested in the stock market and therefore would have been growing well over the last 20 years or so.

Luckily their other pensions are invested in the stock market, so they have not suffered in the way that fixed interest funds have in recent years. But it’s still quite a tough pill for them to swallow, knowing that if they’d looked at this even 10 years ago, they’d be in a far better financial position today.

Risk warning: This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a personal recommendation. The figures quoted are for illustration purposes only.  With investing, your capital is at risk.

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