Find out how to get a free pension review and the right advice about your options to go with it
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Author: Richard Angliss - Finance Expert
Updated: December 02, 2022
You may think that just because you have a pension plan in place, you’re financially prepared for the future. However, you may not be aware of the importance of reviewing your selected scheme on a regular basis, especially since the Pension Freedom reforms of 2015 ushered in seismic change and gave people more options for accessing their retirement savings than ever.
Due to tax relief on contributions you are being given £20 for every £100 invested (even greater for Higher Rate Tax Payers) meaning pensions are undoubtedly effective in accumulating future income in retirement.
The pension landscape has diversified a lot over the years. And if you’ve previously enrolled in a plan with a specific funding pattern and investment approach in mind, it’s feasible to assume that everything’s ticking along as expected.
But if you enter retirement without reviewing your pension schemes and investments, the sum accumulated may not live up to your expectations. You may even discover that your chosen plan may have become unsuitable for your situation years ago.
This article is going to explain what a pension plan review is, why it’s important to have them regularly, and what the process should involve.
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Pressed for time or simply want a one-to-one chat? The team of experts we work with are more than happy to review your pension scheme with you and deliver bespoke advice for your situation and needs.
Give us a call on 0808 189 0463 or fill out our online enquiry form and we’ll match you with an expert shortly for a free, no-obligation chat.
What is a pension review service?
A pension review is where your current pension scheme or schemes are examined to determine their current performance. These reviews are reviewed by regulated financial advisors.
The process will involve such things as how much your pension funds have grown, how that compares to other similar pensions, what is it invested in and how much risk does this expose you to, does it have access to the benefits of the 2015 Pension reforms (e.g. can you take tax free cash at 55 instead of at your retirement date? Do you have to take an annuity? Can you drawdown does the fund die with you or can it be inherited by your loved ones?).
What does the pensions review process involve?
During a pension review, a regulated financial advisor will look over your pension and investment products to see if they are performing as well as they could be. Your pension review process may involve an advisor looking for the following:
- Underperforming investments and/or expensive management fees that are restricting your financial goals
- If your current pension products fit with your attitude to risk (or if you’re unsure, an expert can work with you on this)
- If they are currently on-track to meet your retirement income goals by a desired age
- Whether you should merge your pensions together (pension consolidation) or keep them as single pots
Once your financial advisor has made a full assessment, you can make a fully informed decision on how to approach your pension management. An advisor can also find products that are more appropriate for meeting your financial goals.
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Why should I have a pension review?
Your pension is your income when you finish your working life. You need your pension to be working as hard as possible to give you a comfortable lifestyle.
If you set up a scheme which has been following the same investment approach since day one, you may find that your pot wouldn’t have accumulated enough funds to support you during retirement.
And this is where the benefits of pension reviews become apparent. For example, you could find that the 5% you’re paying in annual fees for three separate pension funds could be transferred into one single fund with lower management fees, thus reducing annual fees.
Alternatively, a pension review could reveal that your original options are performing poorly, and that by transferring to a different pension plan, your funds are likely to grow at a faster rate. This could then be reviewed again the following year.
If you miss taking advantage of fund growth for even a few years, it could have a huge impact on the future value of your pension pot and therefore your retirement income.
What pension types can be reviewed?
There are two types of pension you can have…
- Defined Contribution (DC) pensions
- Defined Benefit (DB) pension
Both can be reviewed, though read the sections below for a full breakdown.
Defined Contribution (DC)
With a Defined Contribution (or money purchase) pension, both yourself and your employer contribute funds into a pot (NEST plans, SIPPs and stakeholder pensionsd are examples of these schemes). The amount you get will depend on how much has been paid in, how much tax relief you’ve received, and how well your investments perform. It’s essentially your own personal investment fund.
Before the Pension Freedoms Act of 2015, you had to put the taxable 75% of your pension pot into an annuity. Now, however, those with a Defined Contribution pension have the freedom to access their pension from age 55 and do with it what they wish.
Defined Contribution pensions are the simplest when it comes to reviewing and moving from one pension provider to another. DC schemes can be:
- Personal pension
- Stakeholder pension
- Self-invested personal pension (SIPP)
- Schemes used to contract out of SERPS
With a Defined Contribution scheme, you can opt to switch or transfer your pension to another provider. A switch is just moving your benefits from one DC provider to another. A transfer, however, is transferring a money purchase scheme to a personal pension.
Capped drawdown vs. flexi-access
The Pensions Freedom Act also saw capped drawdown pensions close to new applicants in 2015. If you decide to take out 150% of your annual income from your capped drawdown pot, it will automatically transfer into a flexi-access account. Otherwise, you can choose to convert it yourself.
Defined Benefit (DB)
A Defined Benefit transfer isn’t as simple as a DC scheme: rather than having an individual pot just for yourself, you pay money into a scheme which will pay you an income.
Defined Benefit pensions (also called final salary pensions) typically come from public sector jobs or large private companies, and your pension amount increases based on the number of years you’ve worked there and your salary amount.
You can review your Defined Benefit pension, though if you do want to transfer your funds out, you’ll need to get a cash equivalent transfer value – this is a lump sum in exchange for you giving up a pension from the scheme.
You will then need to move it into a Defined Contribution pension.
You’ll need advice from a regulated financial advisor if your pot is worth more than £30,000. Only an adviser can carry out the transfer as the FCA do not allow individuals to do it without proof that professional advice was given and the recommendation is to transfer.
Why is it important to review my personal pension?
A personal pension is a type of Defined Contribution scheme that you arrange yourself. It allows you to contribute to your own pension, or to someone else’s pension (such as a spouse or child).
A personal pension is a great option to provide additional funds for employed workers alongside a workplace pension. However, a personal pension could be very valuable to a self-employed individual or unemployed person as it allows them to contribute to their future when a workplace pension isn’t viable.
With this in-mind, it’s definitely worth keeping on top of your personal pension products to make sure that your extra contributions are performing their best with the right provider.
How often should I review my pension?
It’s advisable to check at least once a year, though this depends on your circumstances and what you’ve invested in.
Pensions are long-term investments, so it’s understandable that people neglect to review theirs for years, if at all – but as we’ve established, that often ends in disappointment. But agonising over it every month doesn’t make sense either.
The experts we work with are fully regulated by the Financial Conduct Authority (FCA) and are legally authorised to give you advice regarding your pension. Make an enquiry and we’ll match you with someone for a free, no-obligation chat about your pension review.
Will a new pension plan cost more than my old one?
It depends on the scheme you’d like to transfer to, and what benefits there are.
If you do have to pay additional costs, make sure that they’re justified – this is where working with a financial expert would be very handy, as they can run through everything with a fine-tooth comb and go over any potential issues with you.
Can I combine multiple pension pots into a single place?
Yes, you can, though you would need to make sure that this is the right option for you.
Having all your pension pots in one place can make things much easier for you, though make sure that you aren’t missing out on a good deal for the sake of simplicity.
You can make the process easier by working with a financial advisor. Because they have access to providers across the pension market, they can find the right pension providers for your financial goals, and also weigh up the benefits of transferring into one place.
Will I lose any benefits?
Your current pension(s) may have certain benefits that you would prefer to not give up, for example a good pension for a beneficiary if you were to pass away.
A financial advisor will be able to help you with this.
They’ll be able to spot any unique features in your scheme and make recommendations based on what they find. Make an enquiry and we’ll match you with an expert today.
Who are the best UK pension providers to switch to?
While there isn’t an overall ‘best’ pension provider, there’s definitely a ‘best’ provider out there for you, and an insurance expert can help you find them.
Get in touch and we’ll match you with an advisor who can use their whole-of-market access to find the right providers for your circumstances.
How much will a pension review cost?
Many advisors provide an initial free consultation, then will quote you a fee. Fees are paid on transfer not upfront and most people take the option to pay them from their pension pot rather than paying directly.
This is usually calculated as a percentage of the amount you wish to transfer, withdraw, and/or invest.
The cost is incurred only if the client takes the advice to transfer. They do not usually pay for the review, unless they insist on doing so. The fee will depend on the size of the pot, the number of years to retirement and so on
Basically, how much you can expect to be charged for a pension review is completely case-dependant: the provider, size of your pot, and what you want to do as a result of your review will all play a role.
Make an enquiry for a free, no-obligation chat with an expert about a pension review.
Are free pension review services available?
You can get a free consultation, however, you will most likely have to pay a fee if you want to take action (e.g. switch your investment plan) as a result of your pension review.
It’s always advisable to work with a reputable and fully qualified financial advisor to ensure that your money ends up in the right hands and you are protected going forward.
Book in a pension review today
Whether you’re planning to retire in a few years or you’re currently retired, it’s always a great idea to review your current financial circumstances in order to offset any potential risk.
For peace of mind, speak to one of the experts we work with. Give us a call on 0808 189 0463 or send us an online enquiry and we’ll match you with someone for a free, no-obligation chat about your pension review.
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About the author
Richard Angliss has made a career in financial services which stretches over 40 years.
His early career was spent learning about the various financial products and applying them to prudent advice, working for one of the largest life assurance and investment firms. After that he joined the financial services arm of a very well-known firm providing independent advice to their 8 million customers.
For the last 20 years he has been involved in building software solutions that help Advisers and clients work together to achieve good financial outcomes and helping to set up three independent advisory firms. He also has written many articles for financial services publications and provided commentary for newspaper journalists.
At an early stage in his career he realised the great satisfaction that comes with being able to help people achieve their goals and protect their families. “Regulation of financial services has hugely impacted on ensuring people get appropriate advice. The issue these days is access to that advice and just as importantly regular reviews to make sure that everything stays on track”.
With the growing development of online resources such as Online Money Advisor he sees a great future for people to access advice to make their pension and investment work harder for them. Plus, of course, to ensure they have insurance products in place that will be required when unforeseen events happen.
He knows getting that balance right is crucial to prudent financial planning and the wellbeing of individuals and their families.