Is your pension scheme seriously underperforming? If so this is what you need to do!

Oct 24, 2016 | Tony Byrne's View

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Are you an enthusiastic DIY investor or an apathetic one? Do you truly have the time, inclination and skill to manage your pensions and investments? If you do that’s great. If not, you need help.

If you are a member of a company pension scheme it’s probably what’s known as a money purchase pension scheme rather than a final salary one. The former consists of a pot of money whereas the latter offers a “guaranteed pension” at your selected retirement age based on a formula. Most employees are members of company money purchase pension schemes these days. Why? Because final salary pension schemes have become too expensive to run primarily because of people living longer.

The problem we find regularly is that nobody is managing these company money purchase pension schemes. This is because employers’ cannot advise their staff because they are not authorised to give financial advice under the Financial Services Act.

At best staff get given broad guidance but left to their own devices most individuals are terrible at investing! This isn’t just me saying it either.

There has been much research on the subject of poor investment performance and poor decision-making of
self-investors. Active fund managers under-perform the stock market by an average of 2% a year. Private investors under-perform active fund managers by a further 2% a year! That’s dire.

However, the biggest problem I find is that most members of company money purchase pensions make virtually no investment decisions at all! Usually they are given a limited range of funds to choose from, they will virtually always choose a “managed fund” and then never review it again or make any fund switches in future. The result is usually very poor returns.

So if you recognise this as you and you have a pension fund worth at least £100K why not take advice from us?

Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.

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