How we got Mr Jones’s additional pension back on track

It is easy just to leave your savings where they are. However, it pays to review them with the help of a professional financial adviser, as Mr. Jones discovered when he contacted us earlier this year. Mr .Jones, aged 50, is divorced with non-dependent children and is planning to retire at age 65. A few months ago he asked us to look at his pensions, which he had neglected for years.  He had a personal pension to which he was contributing £64 a month net (£80 per month gross). This pension was started many years ago and was invested in a with-profits fund. When he consulted us it had a value of £75,600. He also had a small public sector pension which he can take when he turns 65 and will qualify for the maximum basic state pension when he reaches the age of 67.

Needed to boost his pension pot

Mr Jones was particularly concerned about boosting his personal pension provision, while bearing in mind that he may downsize when he retires so is likely to have additional capital available then from selling his property. He wanted to pay a little more towards his pension, although he didn’t have a set target for the amount of income he would need when he retired. He was likely to receive an inheritance from his elderly parents in due course.

Personal pension not aligned to risk profile

Our adviser completed a risk analysis for Mr. Jones, which highlighted that the fund in which his personal pension was invested was unlikely to be delivering an appropriate performance for Mr. Jones’s needs and expectations. In addition, the cost of this old plan was not particularly competitive compared to that of more modern plans, which might also offer Mr. Jones more flexibility and choice in terms of accessing his funds when he retires.

Move to a modern, more competitive plan

The adviser suggested that Mr. Jones move his personal pension to a more competitive plan, which would also allow him to take advantage of the flexible access options when he starts drawing his pension. The adviser also recommended investing the pension fund in a blend of investment styles, with a competitive overall average charge. Any income generated at this stage will be rolled up for growth potential. This ensures competitive overall annual charges and gives a risk-targeted investment approach to Mr. Jones’s retirement fund.

Pension now aligned with his profile and goals

Mr. Jones agreed to go ahead with the adviser’s recommendations and increased his monthly pension contributions to £200 per month net (£250 gross), as he now has the budget available to do this. He now has a modern, cost-effective personal pension that is aligned with his objectives and personal profile and designed to grow in line with his expectations. The adviser will review Mr. Jones’s pension and other savings annually, to ensure that they remain “risk appropriate” and that Mr. Jones is contributing as much as he can afford within the various limits. Mr Jones’s name and circumstances have been changed to preserve anonymity.

The value of your investments, and the income you receive from them, can go down as well as up, so you could get back less than you put in. A pension is a long-term investment and inflation will reduce how much your income is worth over the years. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.