The Importance Of Regular Pension Planning Reviews

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    The importance of regular pension planning reviews

    There is no doubt, joining a pension scheme can be confusing.  Once you’ve made your move and started pay contributions you may assume that it is it . . . it’s sorted.   But pensions are a long term commitment.  The chances are your life is going to change during the next 20 or 30 years.

    Jobs, salary, priorities and commitments are all prone to change and all of these can affect on your pension planning.  So, it is best to keep on top of changes by reviewing your plans with a financial advisor on a regular basis.

    Bear in mind pay increases

    As your life and career is subject to change it is vital that you review your pension planning regularly to make sure you are on course for your retirement plans.   For example, if you receive a rise or get promoted you should also increase your contributions to reflect your higher earnings.

    The “Holy Grail” for a pension is to provide two thirds of your final earnings.  But if your pension contributions aren’t kept in line with pay increases you may be hard pressed to achieve the amount of income you want in retirement.  Or, you could be forced to make much larger contributions later in life to try to get your pension saves back on course, which may be financially difficult.

    Changing jobs and your pension

    While many may only think about the increase in their salary if they change jobs, it is important to also think how your pension may be affected.  Do you keep the pension benefits you’ve built up where they are or transfer them to your new scheme?

    It is also worth bearing in mind that if you move from a company with a final salary scheme to one with a defined contribution scheme you will now be burdened with the investment and longevity risks, not your employer.

    These days, changing jobs to get ahead is a fact of life.  However, if you do change employers it is a good idea to review how the new job will affect your pension planning and get professional advice.

    Redundancy and pension planning

    Unfortunately, except for a few chosen professions, few of us can rely on a job for life.  And in times of economic uncertainty redundancy rears its ugly head.  Of course, along with loss of earnings and a knock to your self-confidence, being made redundant will also affect your pension planning.

    If you have been made redundant and have been a pension scheme member for less than two years your contributions will be returned to you.  If you’ve been a member for longer and made redundant, you can either transfer your pension benefits to another scheme or keep them where they are.

    If your employer becomes insolvent you may be able to get compensation from the Pension Protection Fund, assuming you’re in a defined benefit scheme.

    Once you are back at work you will need to decide what to do with the benefits you accrued with your former employer do you transfer them or leave them where the are?  You may also want to make additional contributions to make up for when you weren’t working.   Or, if you can afford it, you could use some redundancy money to boost your pension pot.

    Changing goals and your pension
    Pension are a long term investment and it is possible that your pension plans may change after a few years.  You may find that as you approach retirement you decide you want to cut down on work gradually, going from full to part-time.  Or, perhaps you decide you want to finish work just a year or two early.

    Whatever the change in your retirement goals, regularly reviewing your pension planning will enable you to keep your retirement planning on course.

    It pays to review

    From promotions to job changes or even redundancy ,your pension planning needs to keep pace with your retirement ambitions and career changes.   Saving for your retirement with a pension is a long term commitment and it pays to keep on top of changes in your life and career with regular reviews.

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