Over the past few months I have become more and more fascinated by why so many people happily admit to being in the 71% who either don’t read their annual pension statement or just give it a cursory glance and file it away never to be seen again (71% figure quoted in recent Standard Life Ireland survey). This seems to apply at all ages and all sizes of pension funds.
Why is that? Seriously… Just why is that?
The three same answers crop up time and time again. They are:-
Its all gobbledygook to me.
I am sure that someone somewhere started off with very good intentions but I agree, with very few exceptions, it is all gobbledygook. That does not mean you should ignore it. It is your money. You have worked hard for it. The less you understand the statement the more important it is to give it some attention and don’t stop until you have some answers which make sense. Don’t wait until age 65 and wonder where it all went wrong.
I have a lovely adviser I like and trust and I leave it all up to him/her.
Of course you like and trust him/her. An adviser who is not likeable and exuding trust would not last 5 minutes in the Financial Services world. But it is not his/her money – it is your money. Leaving it all up to him/her without really, really, taking the time and effort to understand how he/she is looking after your money and how you judge results just won’t work. A good adviser will welcome your questions and love working with you. The one who says “it’s all ok – just leave it to me” should raise alarm bells.
And by the way in approx 90% of cases he/she is not personally looking after your money. All he/she is doing is delivering a standardised service designed to reduce compliance/complaints risk to his/her employer. If you have in the past received a written Financial Report go back and re-read it. The chances are that at least 75% of it comprises word processed content designed to cover the firm’s back if anything goes wrong. Less than 25% of the content will be about you.
So if you have an Adviser you like and trust ask him/her to explain the statement to you and don’t stop until you can give yourself an understanding mark of at least 7 out 10. Then go back a week later and see if it still makes sense. If not get him/her in again but don’t pay twice!!
There are far more important things to pay attention to.
Ok I accept that reading pension statements will never top enjoying good wine, good food, good friends, family, holidays, good health etc but wait a moment – all of those things will still be important in retirement. If you have not prepared well financially where will that leave you?
Look I know it is not fun but it really does need more attention than it is getting.
It is not going to take long. Once you start to take an interest there is loads of useful information online to help you along the way. You don’t need to become an investment expert. All it takes is a bit of time, attention and good old common sense and you will soon have a good grasp of what is going on and how you can gain control of your money. It may be locked away but it still needs some care and attention from you.
Unfortunately I come across pension plans every week which just make no common sense at all. Thirty year olds who are putting money into Cautious Funds which are making no money. All because they filled in a Risk Questionnaire they didn’t understand, which came up with the conclusion they were a “cautious investor”. That money can’t be touched for 25 years. Volatility is their friend not their enemy. I am not talking about taking massive risks. Just making sure the money is working hard for you.
Money allocated to what the pension industry calls “Lifestyle Funds” – this made perfect sense when your pension fund had to be used to buy an annuity at retirement. It makes absolutely no sense since recent legislation has given us far more choices at retirement. If you don’t pay attention and ask for changes the chances are that a decision you made years ago will result in you remaining in inappropriate funds for years to come.
I started with three reasons why those pension statements just get filed away. In reality it comes down to one reason.
NO-ONE HAS BEEN ENCOURAGING YOU TO PAY ATTENTION.
It’s just not in their interest. All they want to do is to collect their fees and avoid complaints. That’s not right. It is your money and it needs your attention.
I like to finish every Blog post with an action point. This one is dead simple. Just get out that pension statement and try to understand it. If you still don’t, click the box on the right and pre-register for our forthcoming online “understanding your pension statement” workshop.
There is more work to be done before we are ready to go but it should be quite soon.
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