Regardless of who you are, everybody wants to retire happily at some stage in their lives. Everybody wants a retirement that provides an income and that provides protection for their loved ones and family.
We’ve talked about pensions a lot in previous blogs and the benefits of combining and consolidating your pensions into a flexi-access pension.
But once all that has been taken care of, how can we get the best out of the money we’ve put aside? How can we make those funds work as hard for us as possible?
Is it finding the lowest charges? Is it investing in the right funds? Is it finding the right provider?
Performance is everything
The answer is surprisingly simple. If we want to produce a decent income from our pensions, if we want to maximise our returns, it all comes down to performance.
You can almost forget about charges. There’s so much talk about charges being important these days, and everyone is after pensions with as small a charge as possible, but ultimately, the cost is irrelevant if you are getting a good performance.
If you really want to boost your pension, any extra cost you would pay to have a good independent financial adviser is well worth it.
A sophisticated portfolio is well worth it
For example, let’s say you have an in-house managed fund with a cost of 0.5% a year and it produces a return of 20% for you.
A sophisticated portfolio built by an experienced independent adviser may cost you 1%, but if you are getting a 50%, 60% or even 70% return on it over the next 5-10 years, that extra 0.5% is money well spent.
Yes, it costs you a bit more, but it’s a bit more that will make you a lot more money potentially.
Boosting your pension successfully all comes down to performance, and the best way to boost your portfolio is to build the right portfolio with the right attitude to risk.
Reviewing and rebalancing your funds
By doing this yourself, you might make a success of the good years, but those overinflated funds, from which you’ve not removed the profits, might get hammered in the long run if you aren’t careful. To get the most out of funds like this, they need to be reviewed and rebalanced at the right times.
Even from an administrative perspective, there is no comparison between doing it yourself and getting an independent financial adviser to manage your pension. Those rebalances are important when your equity funds have grown too big, because those funds will dominate your portfolio and are subject to the biggest falls.
The most significant boost that you can give your pension is to get an independent adviser to run the money in it. They will handle your pension with a pragmatic view and rebalance and maintain your funds at the right risk level; and they will pick the right funds with real value in them in the first place.
More experience, more knowledge and more choice
Independent financial advisers have decades of experience in these things, so the likelihood is that they are going to pick better funds than you will for your pension. And if there aren’t many funds available in your pension now, they can move you to a pension with a wider range of funds.
At Applewood Independent Ltd, most average basic pensions that we come across have a choice of between 50 and 100 funds. However, every platform we use has a choice of thousands of funds. We have a wider choice, and we meet and speak with the fund managers every day!
We know when to buy value when it’s cheap and when to rebalance funds that are performing well when they’ve made decent profits.
So, managing your pension in-house might seem like a good idea because you are saving in the short term, but in the long run, perhaps the wisest move you can make with your pension is to get the right independent financial adviser to represent it, irrespective of the cost.
Most of the time, they will find the cheapest way possible for you to make the most of your pension, giving you the most choice, the most flexibility and the best performance possible.
I hope this has been useful, and if you have anything else to add I’d love to hear from you. To find out more, feel free to get in touch by emailing firstname.lastname@example.org.
The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.
The value of your investment can go down as well as up and you may not get back the full amount invested.
Past performance is not a guide to future performance.