A recent survey reported in the Independent confirmed that people are twice as likely to track the number of steps they walk each day as they are to check their pension fund.
Clearly, monitoring your fitness and looking after your health and wellbeing are positive traits, and certainly not ones that we would not want to dissuade you from following.
However, while we clearly have a professional interest when it comes to pensions, we believe it’s equally important to think about your financial future – although we would not recommend a daily check!
The survey also reveals that a similar number of people are worried about their financial health (42%) as those who are concerned about their physical health (48%).
So, while we’ll leave counting steps and other activities to the fitness experts, read our pitch for why you need to know what’s in your pension fund.
Your pension will provide your income in retirement
Your eventual retirement may well be more than 20 years away. As a result, it might be an event that you struggle to pay much attention to.
However, as it could well last for 30 years or more, it’s worth planning for.
Furthermore, it’ll be a time when you are likely to no longer be working, and as a result will be relying on the wealth you have accrued to provide you with your income.
Research from Standard Life shows that in order to live a comfortable life in retirement you need an annual income of £43,100.
This amount will provide you with some financial freedom and enable you to afford some luxuries such as holidays abroad and buying a new car every five years.
While any UK State Pension you may be entitled to can be a handy income underpin, it’s certainly not enough to live comfortably on by this definition.
You will no doubt want to live a fulfilling and happy life once you stop working, and not have to worry about making difficult choices around your financial priorities.
Because of this, it’s important to be aware of the value of your pension fund, and to ensure you are maximising contributions to accrue a sufficient fund to be able to live comfortably.
Clearly, the £43,100 figure cited is only an average, and your personal cost of living will depend on your personal circumstances and retirement plans. However, it does give you a good idea of what kind of income you may require.
How your funds are invested could have a big bearing on your future wealth
One of the most sensible ways to build a fund for your retirement is to make regular monthly contributions into your pension arrangement.
You also need to ensure you have an effective investment strategy to grow your wealth. This will need to take into account your attitude to investment risk and the rate at which you are looking for your wealth to build during the years before you finally retire.
You will want to give yourself the best possible chance of achieving your financial goals, so knowing how you are invested, and how those investments are performing, will be key to this.
Your investment strategy is like the engine that drives your future wealth. As with any good engine, it shouldn’t need constant attention, but the occasional check can confirm that it’s running smoothly or whether you need to make adjustments.
Regularly reviewing your pensions can help keep you on track
As well as keeping track of how your funds are invested, you may also want to review your pension regularly.
You don’t need to do this too frequently, just as you wouldn’t check your investment values every day. But, it can help to include it in an annual review of all your financial planning arrangements, as well as when your circumstances change.
Such circumstances could include starting a new job, setting up your own business, or if you are considering moving back to Australia.
Keeping track of what you have also allows you to react if any changes in financial legislation could affect you. For example, you may have read our articles about the recent Budget, and how the changes announced could affect your financial plans.
By knowing what’s in your fund, you will have a better understanding of how you may be affected, and whether you need to take any necessary steps to ensure your plans remain up to date.
It’s important to know where all your pensions are
An important part of knowing what’s in your pension is ensuring that you keep track of all your funds.
According to research carried out by Liverpool Victoria and reported by StandoutCV, the average employee will have at least nine jobs in their career.
If you consider that each different employment could result in a separate pension arrangement, it’s easy to see how you could lose track of what you have, particularly if you make any contributions into private pension arrangements, too.
You will also want to ensure that you have an accurate and up-to-date schedule of any super funds you may hold if you have previously worked in Australia.
If you believe you may have lost track of any old pension funds, there are ways of tracing these in both the UK and Australia:
- In the UK, the Pension Tracing Service can help you find old workplace and personal arrangements.
- The AustralianSuper website can help you keep track of your accrued super funds.
- Additionally, if you are British and only worked in Australia for a short period, the Departing Australia website can help you find any funds you may have lost track of.
You may want to consider consolidating all your UK pensions into a single arrangement
Having established where all your different pension funds are, you may want to think about bringing them all into a single plan. This is known as “consolidation”.
Doing this will mean that you have a single view of all your pension holdings and make it much easier to keep track of the value and how your money is invested. It may also help save you money in terms of reduced charges and administration costs.
Consolidation can be particularly important as you get close to retirement and will want to start drawing income from your fund. It will obviously be much easier to do this from a single pot, rather than several.
Additionally, if you are planning to move to Australia to retire, having one single pension fund can simplify the process of transferring your accrued pension assets to a super.
However, consolidating in this way may not necessarily be appropriate in your circumstances. We would recommend you get expert advice.
Get in touch
Having now read this article, if you would like to talk about your own pension arrangements and retirement plans, please get in touch with us.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only, it does not take into account your personal objectives, financial situation, or needs. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances.
All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.
