Anything to do with long-term investments especially pensions need to be reviewed on a regular basis. The problem with pensions is that once you either pay in a lump sum or make a regular contribution you forget about it because the only time pensions will become relevant is upon your retirement. The last thing you want to do, when you retire is to find out that you face financial hardship and difficulties as a result of the pension not being correctly managed or being set up incorrectly in the first place. Namely that it could well have been mis-sold or mismanaged along the way.
Why Should I check my Pension?
Pensions are an important part of financial security later in life after you retire. Not only with the new pension freedoms which enable you to withdraw 25% tax-free lump sum. You are also able to receive a monthly or annual income that will support yourself and your spouse following your working life. Pensions can vary greatly and the benefits alter should the product not be sold correctly at the point of sale. Indeed, the management of the pension also needs to be reviewed to make sure the necessary actions taken in order to meet your requirements financial security upon retirement.
What is a Pension Wise Review?
A pension wise review offers the ability for you to assess in the first instance whether the pension was sold correctly and the advice given was appropriate to your financial circumstances, both at the time where financial requirements and considerations are taken into account for the years to come when the pension would have become relevant. In addition the ongoing management of the pension is also vital in order to maintain the ’pot’ of money that will fund the drawdown of the pension upon your retirement or should you wish to obtain a tax free lump sum of 25% to maximise this following your 55th birthday.
How do I know if my Pension is Correct?
The honest answer is it’s very difficult to know whether your pension is correct and been sold correctly. Pensions can vary and the types of products are at times confusing. Your faith in the financial adviser that has suggested and set up the pension is important. If anyone has a pension it is always worth reviewing independently every two or three years. Certainly if no review has taken place since the point of sale a full review should happen if only to give you peace of mind that the product sold was correct and that the ongoing management of the pension fund is appropriate.
What Should I do if my Pension isn’t right?
There are a variety of options open to you should your pension not be correct or suitable for your needs both at the point of sale and the ongoing management. Generally speaking although not always guaranteed, if the sale initially was correct then the likelihood of the ongoing management is also likely to be appropriate. That is not necessarily always the case and still worth checking but if a financial adviser has been correct initially then you should have more confidence that his ongoing care for your financial needs will continue. However, in the financial world things change and this is not always guaranteed.
Are Pensions Normally Mis-sold?
The main problem with regard to pension mis-selling and whether pensions are normally mis-sold is that the commissions earnt by any financial adviser would as a result of promoting any pension product is considerable. Whether they are lump-sum investments or regular monthly contributions not only is the initial commission lucrative but due to the nature of the pension product which is taking over in some cases several decades the ongoing pension can provide a very lucrative regular income.
In particular concerning final salary Pension transfers commissions for financial advisers can be incredible and anybody who has undertaken any form of final salary transfer of their pension in recent years should have this checked.