While I pondered the year ahead, and started planning for the world of financial education in 2017, it struck me that I should get my household pension plans in order. This was, however, possibly another subconscious move to yet again shove my tax return to the bottom of my to-do list… But let us continue. It occurred to me that, in this era of austerity, employees could also benefit from doing the following three free things:
My wife and I have consolidated all of our ‘stray’ pensions. One of mine was a small contracted-out sum and two of hers were from short periods of employment in the last ten years. I am delighted to report that it was easy to shift my Scottish Widows contracted-out plan and my wife’s auto-enrolment plan with Friends. Everything was electronic; no fuss, no paperwork, free and done in days. Well done to the contract-based side of the industry! Sadly, her occupational scheme from a large UK media company took weeks, and what a kerfuffle dealing with them.
Come on large employers, make consolidating pensions easier, and stop offering people the option of just a return of their own contributions when short service periods apply. It is hugely crass and depending on who you are dealing with, not even always free! I took a refund once in 1990, but in my defence I was just leaving a short period of employment as a trainee chartered accountant and didn’t know any better; it was just there and available.
I then blew it on a holiday – a brainless and moronic action that put me a year behind on my long-term pension plans right from the start.
These are the four life phases we all go through, and your attitude to investment risk is likely to change as you transition from one to the next.
So should I just be sitting in my workplace scheme’s default investment option? Almost definitely not, as I am more risk accepting than the passive option on offer (no doubt in my mind believing I am still in my lager phase). So during this sunny, chilly January, it seems like a good time for all employees to check the risk profile of their default fund and ask ‘is this really me?’
I’m not suggesting that everyone should take more risk. However, when I run worksite financial education sessions and ask employees to comment on the risk profile of their default fund, many often ask how they can change this. Very few know that it is usually free to change, can be done online and as often as is required.
For people considering their retirement options (and be aware that the freedom to draw income and still pay into your plan may change again in April 2017), these sessions are available both face-to-face or over the phone. I am still (ahem!) too young to have used the service personally, and nor is the timing right for me yet, but I definitely will take advantage of such a great offer at some point in the nearish future. Unfortunately, these free sessions have not been utilised as much as the government had predicted, which is baffling. As retirement options get ever more complicated, this should definitely be a retiring employee’s very first action.
So, just some January musings from a self-proclaimed expert non-expert. I like free – particularly at this time of year!
This article was first published with REBA on 16 January 2017