the minefield of pensions

[bettysyourauntie]

I am seeking some initial advice as I begin to map out my pensions, an area of my finances that I have, unfortunately, neglected over the years. Now that I’m getting a bit older and become more aware of the reality of retirement I suddenly feel some urgency to take stock of my pension. The good news is that I mostly have access to my various pots and have been tracking and seeing them (very slowly) grow but I have no doubt a more proactive management is now overdue.

My main question is: What do most people do in this situation? Is it common to work with a pension advisor, or is it feasible to manage on your own? I still have a good few years before I plan to retire, so I’m comfortable taking on a slightly higher risk to make my pension funds work as hard as possible.

I approached a financial services firm that I know, and they quoted £2K for a review, consolidation (if makes sense), and a lifetime plan. Given the size of my pension across the various pots, this seems high to me at the moment.

Before diving into Google, I wanted to get some initial pointers on the best way to navigate this minefield. Has anyone seriously boosted their pension in middle age and turned the picture of their future retirement around?

sorry! they quoted £3k!

Have a listen to the Meaningful Money podcasts. Stacks of information there and you.might find you can do it yourself. If you're over 50, make an appt with PensionWise too.

I second listening to the Meaningful Money Podcasts 😁

Also, call the helplines at your current pensions provider(s), ask them which funds you have invested in (if you don't already know) and ask if they offer anything slightly higher risk. Look at the options they offer and the history of returns from each.

My husband and I have been reading Money Week magazine for almost 20 years now, this is our qualifications. We have been assessed as having high level of financial knowledge by an independent financial advisor when my husband had to pay 7k for the privilege of taking 25% tax free sum out of a defined benefit pension (not to be confused with the defined contribution - the former is much more valuable that the letter). I opened a SIPP account with AJBell and stuck their money into their funds earlier in the year as I wanted a bit more control than my occupational pension was prepared to give me. AJ Bell have been voted best by Which for many years now. They provide a lot of free advice for all levels of invester knowledge. I was very impressed with the service. My husband had a SIPP with a different provider that kept charging ridiculous amounts of money. So he switched to AJBELL and they handed everything on his behalf. I would also recommend Psychology of Money book available from Amazon. I suggest don't spend a penny before you look into your options yourself. Financial industry doesn't have a great reputation, it would be good to have some background knowledge in my opinion

@AddictedtoCrunchies and @speak2me where can I find these podcasts please?

Contact Zippen, see if they can help. I believe they get fees from the providers, not end users

Start with your state pension by doing a pensions forecast. https://www.gov.uk/check-state-pension

Spreadsheet with a line for each pension, current value, normal pension age, current and predicted value etc.

Spreadsheet setting out current expenses - include everything e.g. Christmas presents etc. Do a predicted retirement expenditure as some will increase others will decrease. This should help work out the income you need.

Remember you do not pay NI or pension contributions on pension income. A gross to net PAYE calculator can help you see what net income you will have from your pensions.

Look at FIRE (Financial Independence Retire Early) threads on here and MSE forums. They can be extreme but have good ideas on how to plan for retirement.

Just download Spotify, set up a free account then search for Meaningful Money. There are hundreds to choose from and are very good.

I’ve consolidated all of my pots (except one where I have a higher tax free cash entitlement) to a SIPP with Vanguard, invested in the FTSE Global All Cap Index fund.

Do some reading around risk levels/types of investments. I’m happy to accept risk as I’m some way from retirement, but I don’t want to pay adviser fees or for active management, so chose a global equity tracker.

@SlipperyLizard I can tell you know what you are doing which tells me just how much I don't know. Entering mild mode.

Thank you all so much for your helpful tips. I wonder how long it would take to close my knowledge gap. I feel utterly irresponsible and slightly overwhelmed. For starters, I found the podcasts and keen to get started, but 420+ episodes??!! Where do I begin? I'm scrolling down to find anything with the word 'Pension' in the title but so far the one I picked was apparently for pension pros (a warning was delivered at the start) and mostly it went over my head. There must be a better way to find the information I'm after. Can anyone remember a particular relevant episodes for beginners please? It will take me to retirement to listen to all from the start 😂

Sorry, the previous message meant to say 'entering mild panic mode'.....

How much do you have in your combined pots ? What is your Attitude to Risk & where are your funds currently invested.

As an IFA I have skin in this game. Obviously I would suggest you seek the advice of a professional. People like @SlipperyLizard scare me because they mention funds that might be right for them but maybe totally wrong for you. And as it stands a Global All Cap Tracker is 100% invested into equities of which around 65% is invested in the US. A stock market over inflated & with an economy not sure which way it's going. And could have Trump as President in 2 months time.

But in essence, consolidating your pensions into one is a good idea. Then having them on a platform is another good idea. Platform fees should not be more than 0.25& pa. Fund charges are another thing but I wont give my thoughts on trackers v active managed funds here as I'll be shot down by the Vanguard lovers who've been investing for the past 5 years, whereas I've had 30 years experience.

Don't pay any money to anyone.
How much is in your pension pots?

I don’t necessarily know what I’m doing, I have just read a lot around the subject (I work in pensions) and understand my own attitude to risk.

I’ve also seen professional investment advisers earn a lot of money from telling pension fund trustees where to invest, only to see those funds consistently underperform, then charge more to advise on where to move the investments. That makes me a little cynical about paying for advice - the reality is no one has a crystal ball, so all any IFA can do is match your attitude to risk with an appropriate fund. That may be helpful to some people, but it is not a guarantee of better performance.

My pension pots have been through the dotcom crash and the 2008 financial crisis, and all the other ups and downs of investing, none of which anyone could or did predict.

Meaningful Money also has a YouTube channel:
https://www.youtube.com/@MeaningfulMoney/featured

If you are able to, I think listening to the whole of series 25, ' The Financial Operating System' (sometimes listed as Finance OS) would be really useful background. It's not just pensions, you'd then get an overview how your money should be working for you. Once you've listened to that I think that any of the other podcasts would make more sense. HTH.

Vanguard is similar to AJBell, they hold client's money in a SIPP (self invested pensions). It seems they also offer a selection of funds to choose from depending on the investor's level of risk. AJBell also run ISAs. They have lots of information on their website, you can dip in and out as you please. If you prefer learning by podcast it's a different matter. Please don't despair, learning about investments is not a degree level study. Please be aware of scams. Now that you are making enquiries it's a ripe time someone will contact you out of the blue. Hung down on cold callers and delete random emails. I suggest only go with a reputable SIPP provider such as Vanguard, AJBell, Scottish Widows, Halifax or any other established name. I also highly recommend Psychology of Monday book. I gave it as a present to a friend's daughter on her 18th birthday. Her dad works in finance, he said it's the best book for a non-specialist he ever read. Also consider subscring to Money Week to monitor the trends. The first thing we said to the mortgage advisor in August 2021 - We want a 5 year fix. We got it in October at 1.24%. The subscription paid for itself many times over. I hope it helps

You need to see what type of pension each one is. Defined benefits give you a monthly amount at the end and defined contribution gives you a savings pot to either take from or buy an annuity with. It is rarely a good idea to transfer a defined benefits to a defined contribution as you lose the guaranteed amount.

If you are in the default fund, they tend to start off riskier when you are younger and move to being safer as you get nearer retirement. With the exception of the Liz Truss government, who tanked the value of bonds, which was nearly catastrophic for people close to retirement.

@Biggaybear thanks for your advice! Why do you think consolidation is a good idea? And what is a Platform? Can you recommend one I can look at to understand how it works?

I have an appetite for risk and maybe £100k to play with for the next 12 yr say. In my case there are two main pots and few smaller ones with silly bits of money. On one of them I am charged fees which I need to stop! It's not much but I don't want to pay anything.

I worry my pension is in a pathetic state though I have a property which I rely on as a backup.

Consolidation is a good idea for a number of reasons. Firstly you have every thing under one roof & therefore reduces paperwork (although most providers are going paperless). You also then have one investment strategy rather than having one fund in one pension doing something different to another fund in another pension.

However.... that doesn't mean that you are investing into just one fund (unlike our friend in the Vanguard Global all-cap fund). In the past I have selected multiple funds across all the asset classes so clients have a well rounded portfolio, although nowdays the regulator would prefer a Multi-asset fund & leave the fund switching to the fund manager. In any case, if you are a Moderate risk (say 6 out of 10) then you should be looking at having around 60-70% in equities & the rest in Bonds, Property & Alternatives.

A platform is just a way of holding different financial products under one roof......so yet again reducing paperwork. This is helpful if you have pensions, ISA's & Collectives. Since Stakeholder Pensions came in most pension plans have a basic an Annul Charge of around 1%, with many providers then discounting that depending on how much you have invested in it. Usually this means the Annual charge (AMC) is around 0.5%-0.75%. A platform is generally cheaper at around 0.2%-0.25%. However, the biggest factor is then the charge injured for the actual find you are invested in. People choose Vanguard as lots of their funds are around 0.1-0.2%, whereas a mainstream funds are normally around 0.7%. However, Vanguard's are mostly "passive" funds (trackers) whereas mainstream funds are "active".

Sorry....that was very long winded. The thing is, a financial adviser can do all this for you if you dont have the means, knowledge or time to learn it. Yes they will charge you for this but its no different than calling out a plumber when you want to install a new bathroom. Yes you can look at youtube videos & buy the parts yourself but can you trust yourself enough to know that you wont flood the bathroom as soon as you turn on the tap.

@Biggaybear I don't disagree. I am a professional myself and don't have much time at all. I am capable of learning fast though and with a good commercial head (when I put my mind to it).

Perhaps a step-by-step plan for me as a starting point looks like this:

1 - Consolidate! I have money in Aegon (two different Aegon products), Scottish Widows and Nest. But where to? One of them or a completely different place?
2 - I will look at AJBell and Vanguard as a starter to see what this is about
3 - I am going to listen to podcasts and look at other resources mentioned here and see if it causes me panic or makes sense and is reassuring..
4 - If I am overwhelmed I probably have to seek IFA of some sort ...

Has anyone here managed to double their pension in 10-12 years? Is this a realistic expectation? I know it is much down to making the right choices and luck but is it actually possible? ...

Are you employed? Does your employer offer a pension scheme that they contribute to? If so you should probably join that as step 1 if you aren't already in it!

"Has anyone here managed to double their pension in 10-12 years? Is this a realistic expectation? I know it is much down to making the right choices and luck but is it actually possible?"

Is it possible? Yes: 6%pa returns over 12 years, re-investing the dividends etc, would double the size of the fund. Actual returns on the FTSE All Share over the last 12 years have in fact been 7%pa.

HOWEVER remember that due to inflation half of that increase would probably be lost to stuff just costing more too. And it is far from certain - if you left it all in shares you might get good returns for 11 years and then a market crash that knocks 10-20% off in a matter of weeks.

I think it's worth you doing some more education and maybe speaking to an IFA as you suggest because there's just so much to think about than getting fixated on particular numbers. They will discuss with you what your financial needs are, what you appetite for risk is, how much you need and want in retirement and hence when you realistically might be able to retire, and how much you need to set aside between now and then.