For a lot of individuals the word “Pension” is complicated and it is something that you will deal with later on in life, or it is something that runs along in the background while you work away. However recent studies have shown that we as individuals are now living longer and while it can be difficult to look into the future there are some things you can be relatively sure about. It is highly likely that you will live to retirement age, you will be in reasonable physical shape and fingers crossed you will have another 25 to 30 years to live.

We are no longer in an environment where we can just spend the money we have saved for retirement, retirees are now faced with a situation through which they must replenish their existing pension portfolio at least at the same rate at which they consume.

So not only are pensions important for individuals in pre-retirement years they are also significantly important for those in their post retirement years. While the state do provide a relatively modest State Pension (Contributory) per annum of €12,017 this figure is currently 66% less than the average Industrial Wage Per year €35,749. With the current birth-rate at modestly low levels coupled with the external economic environment we can only imagine that this government support will be reduced significantly down the line. If you want to be free to have decisions and opportunities later in life you need to make the most of the cash and investments you have now. Alternatively if you find yourself on the other side of the fence you need to make your money work for you in order to support your retired lifestyle.

I don’t want to bore people with the benefits of saving via a pension (Tax Efficient, Gross Roll-up, Tax Free Lump Sum) I want to highlight the importance of servicing your pension and making your money work for you. To highlight its importance I am going to use the ‘Car’ methodology. It is something that I use with clients all the time and I think it works great because it eradicates all the complicated terminology and brings it to a very basic level.

As we all know cars are moving vehicles, similar to pensions. Pensions are financial vehicles with moving parts. Just as a car needs a regular service so to do pensions. When your car needs a service you take it to a mechanic, when your pension needs a review you bring it to your financial advisor.

 

 

So what makes the car move? Its wheels, in pensions the moving parts are the asset classes in which your money is invested in (Bonds, equities, commodities, cash), just as cars can break down and need fine tuning so to do pensions. In order for pensions to run as smoothly and as efficiently as possible, and in turn generating the best returns possible they need to be reviewed on an annual basis. Upon review with your financial advisor you may need to make a few adjustments to your portfolio, this might take place for a variety of reasons; Poor performance, over exposure to an underperforming asset class, differing attitude to risk, profit taking to name but a few.

I cannot stress enough the importance of regular review of your pension portfolio, with modern technology your portfolio is only a few clicks away, so take this opportunity to sit down with your financial advisor before it’s too late and begin to take control of your pension.