Tuesday, 5 July 2011

Your Pension Pot - is it enough?

I have always, as discussed in a previous post, tried to take a very simplistic approach to financial arrangements and written things down in order to better understand my personal situation.

When I first paid into a pension, I was working for a company who had no pension scheme, and it came at a time when the second state pension could be opted out of and the regulatory market had changed dramatically.

It gave more personal control over pension arrangements, and possibly like me, many people relied on advice from Independent Financial Advisers (IFA).

This advice was/is not always in the individuals' best interest, only in the interests of the IFA and his/her commission.That is how it seemed to me on reflection of the dealings I had.

The point here is that 'if I had my time over again', I would do things differently. However, not every one makes the correct financial decisions all of the time. So I am stuck with what I have got and have to make the most of it.

In order for everyone to maximise the information available to them regarding pensions, I suggest the following:

Check your state pension entitlement and request a 'state pension forecast from HMRC;

Clarify your company pension status and check if this is going to give you enough in retirement for your projected income (I need to set mine) at retirement;

Include a health check of other pension provisions, such as personal or self invested pension plans and any associated Additional Voluntary Contributions.

This should then give you an overall figure of your worth, in pension income terms, at retirement.

If their is a shortfall consider the following:

Make additional N.I. contributions to gain full qualifying years state pension;

Pay more, if funds will allow, into your company scheme to guarantee maximum entitlement;

Pay more into your personal pension scheme to guarantee maximum entitlement;

For all of the above, I would do the figures first, check your understanding and take this to an IFA for advice.

Be careful to use more than one IFA for guaranteed impartiality. It is as well to read the small print and understand how your pension is being invested.If the vehicle for growth is not rewarding, then consider changing this, i.e. the investment funds, property, markets,bonds,cash etc. You can be part of the decision making process.

For myself, it is a case of following my own advice above and trying to free more of my 'disposable income' to go into my pension pot.

The main challenge for me is to find a method of generating income to fund my retirement with modest levels of income and capital.

my goal this financial year is to add £3500 to my pension pot.

Here goes..

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