- Written by John J Bloomfield
It's a perfectly reasonable question but not one that is not always very easy to answer, retirement planning is a very long term scenario and what that deserves regular monitoring.
When you first start your pension through any adviser or company you will most likely have received an 'illustration' sometimes mistakenly referred to as a 'quote'.
The pension illustration is essentially a best guess at the time based on several assumptions including;
- Either your contribution is going to stay the same forever or it is going to increase at a set rate
- That the underlying investment fund returns the same rate each year show in the illustration
- The rate of inflation stays in line with the assumption of the illustration
- That you retire on the date you guessed you would when you set the plan up
- The plan provider never change their charges
- That you will take the income stage with the original provider, in a traditional manner and you will be in perfect health
With this in mind, I would always strongly encourage anyone serious about providing for their retirement to engage an ongoing support service from a qualified adviser such as myself or at the very least to arrange regular ad-hoc reviews.
To put into context what is meant by an ongoing service a client of mine who engages the 'monitoring service' the following would normally be carried out at least once a year;
- An evaluation of how much money you will want/need in retirement
- A calculation of what level of return your plan needs to return based on current contribution levels to hit your 'target'
- A calculation of how much extra/less you would need to pay into your pension based on the performance that can be reasonably expected from your plan so that you can hit your target
- An assessment of your pension plans performance in the context of other similar plans and funds to ensure you still have the best funds/plans
With all this analysis and information to hand I can sit with you and determine any adjustments that should be made to keep on track, for example, if you can't afford to raise your premiums should you raise the level of risk you are willing to take. Alternatively, if your plan is doing well should you consider reducing your risk or premiums.
A minor course correction once a year can make a big difference in achieving your retirement goals, a major course correction 10 years from retirement can be a very expensive exercise.