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Why reviewing your pension is important

Why reviewing your pension is important

My lightbulb moment

I’ve just celebrated my 26th birthday and to many that is still very young, but to me this birthday felt different. I suddenly felt a lot more conscious of my age. My last big birthday celebration was when I turned 21 but my next will be 30, then 40 and then… well you get the picture. It made me realise that time is flying and that I need to think about what I want to have achieved when each of those milestones arrive. I am now over halfway to 50 (yikes) and to me that has always been a significant age. I hope to begin winding down, be mortgage free and maybe drop a day or two a week ahead of the big aim to retire at 55.

I work with other people’s pensions all the time but when was the last time I sat and looked at my own? Is it realistic to retire at 55 or is it just a dream unlikely to come true? I came to the realisation that if I can’t answer that question then it will never happen. As they say, “a goal without a plan is just a dream” and I most definitely do not have a plan.

Where to start

I needed to look at how I could achieve my goal and the best place to start was by reviewing what I already had in place, and whether it is ‘fit for purpose’. Usually when you hear the words ‘pension review’ you think, nearing pension age and sitting down to work out how to use your money as effectively as possible in your later years… but actually reviewing your pension earlier on in life & on a regular basis is a lot more important than people think.

While you may have been on track to meet your ‘plan’ 3, 4, 5 years ago, a lot can change in that time due to the dynamic nature of financial markets and the ever-changing landscape of personal finances, market conditions and legislative changes. Alterations to your lifestyle can also impact the effectiveness of your pension plan. The benefits of regular reviews is that you can adapt your strategy to ensure it remains aligned with your evolving needs and goals.


5 reasons to review your pension:

Not convinced that it is important or what the benefits of regular reviews are? Here are five reasons that made me realise that comfortable retirement takes more than just a planned retirement age.

1. Retirement Goals – don’t underestimate!

A review of your pension can assist you in achieving your retirement objectives by providing a clearer understanding of the anticipated returns from your pension fund.

It is common for individuals to underestimate both their life expectancy and the required savings for a comfortable retirement. The combination of these factors can potentially lead to financial challenges in later years.

A good starting point is using this calculator to see if you are on track (https://www.sjp.co.uk/calculators/pension-calculator). If like me you don’t like what you see, it isn’t too late to seek help and make changes aiming to achieve the lifestyle you want in retirement.

2. Change in Circumstances

Life is dynamic, and so are your circumstances. Whether it's a career change, marriage, divorce, or the birth of children, your life is likely to evolve over the years. Each of these changes can have a significant impact on your financial situation and retirement goals. Regularly reviewing your pension allows you to adjust your plan to align with your current life stage and financial needs.

3. Inflation

Inflation erodes the purchasing power of money over time. Failing to account for inflation in your retirement planning could lead to a shortfall in your expected income. Regular pension reviews allow you to assess whether your current savings and investment returns are keeping pace with inflation. Adjustments can then be made to your contributions or investment strategy to counteract the ever-rising cost of living.

4. Legislative Changes

Pension regulations and tax laws are subject to change. Staying informed about these adjustments is crucial for optimising your pension plan. By regularly reviewing your pension, you can ensure that your financial strategy aligns with the most current legislative landscape. This proactive approach helps you take advantage of any new opportunities or allowances, ultimately maximising your retirement savings.

5. Optimising Returns

Pension plans often provide a range of investment options. Periodically reassessing your investment choices can help ensure that your portfolio is well-diversified and aligned with your attitude to risk. This ongoing optimisation allows you to capitalise on potential returns, whilst keeping within the risk limits you have set when aiming for the retirement lifestyle you envision.


Final thoughts

For me, reviewing my pension was a great opportunity to re-focus on my age 55 goal, and think practically about the actions I need to take to make it a reality. Regularly reviewing this in future will keep me closer to the performance and achievability of my plan over time, and allow me to be in the best position possible to be feet up at 55.

Pro-actively reviewing your pension throughout its lifetime is key to helping to secure a reliable and consistent income for you later in life. Taking the opportunity to review your goals, plan and performance regularly will give you the peace of mind that you have a well-managed, tailored, and resilient strategy for your retirement.

Whether you are just starting to look at setting up a pension or want to review the provisions you already have in place contact Yorkshire Financial Planning on 01482 275540 or complete our contact form here.

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

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