Redmayne-Bentley Investment Column: Brandy and summer gloves…what will you do with your pension?
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When I am an old woman I shall wear purple, with a red hat which doesn’t go, and doesn’t suit me. And I shall spend my pension on brandy and summer gloves… You may not dream of wearing purple when you are older, but to have the freedom to be so frivolous with your pension is a dream that many of us would share for our latter years. The key, of course, is good planning; and with April’s change in pension rules set to reduce the maximum amount you can contribute from £255,000 to just £50,000, in addition to reducing the tax credit available on contributions for higher earners, it is only going to get harder to top up your pension at a later date. The time for action is now! Pension reviews should cover three areas: charges; investments and flexibility. Do you know what you are paying for your pension and to whom? Do you know how your fund is invested and whether this meets with your own objectives? And do you have the flexibility to switch your objectives or change your contributions and alter the level of benefits as your circumstances change? Take your pension investments for instance. In the pre-purple days, when retirement is a long way off unless those six lucky numbers come in, then you will want your fund to be growing for the long term, so its value is maximised when you do come to retire. You can afford to take on a bit more risk and won’t be worried about generating income; smaller companies, commodities and Frontier Markets (Africa and the Middle East) might feature. As time marches on you will want to reduce the risk profile of your pension pot and generate enough income to cover any withdrawals, so that the fund’s capital value isn’t being eroded and it will last you through a long and healthy retirement. Gilts and other fixed interest will make an appearance; equities will be those with strong, stable and growing dividend yields; and Frontier Market exposure will be scaled back in favour of more generalist overseas exposure. The easiest way to ensure the objectives of the fund are aligned to your circumstances is to use a Self-Invested Personal Pension or SIPP. A SIPP gives you the control to invest the fund in-line with ever changing circumstances; the transparency to see what charges each party is levying and the flexibility to vary contributions and benefits to meet your needs. Management of a pension pot is not to be taken lightly and if you do not have the time, knowledge and experience to do this yourself you should ask a professional to do it for you. Discretionary management of pension portfolios is not like the distant relationship between an investor and a fund manager, there is close interaction to ensure that your objectives are met at the outset of the relationship and that they change when you choose to go spending on your choice of brandy and favourite make of gloves! If you would like a free, no obligation, review of your pension arrangements please email g.mitchell@redmayne.co.uk For further details on Redmayne-Bentley’s investment management services please visit www.redmayne.co.uk/investment More articles in
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