Is your pension future proof?

You may think your pension is future proof, but how can you know for sure?
sign post against sunset | wealthify.com
Reading time: 3 mins

Pensions are designed for the future, right? So, it only seems logical that they’re future-proofed. But what about when things happen that cause significant changes to society – for example, a global pandemic. Is your pension still future-proofed for those unplanned realities?

Fifty years ago, the idea that you’d be able to immediately and frequently communicate with the whole world was the stuff of science fiction. Twenty years ago, people would have baulked at the idea that nearly everyone would have a supercomputer in their pocket. And just a few years ago, the thought that the world would go through a drastic digital transformation due to a pandemic would be unheard of.

But the thing about the future is that it isn’t some carefully planned out thing. So, as nice as a ‘fit and forget’ pension sounds, it’s a good idea to check that it will be future proof. Here’s how:

Plenty of Flexibility
If we’ve learned anything over the last few years, it’s that flexibility is vital to success. So, it only makes sense that your pension offers just as much flexibility – whether that’s how much risk you take on, the amount you pay in each month, or even choosing to extend your pension further into the future.

You may also want to look at how you’re able to draw money from your pension, and whether your provider offers flexibility there too. For example, you may want to have a larger income for the first few years of your retirement and slow it down as you get older. 

In short, having a pension that can be as adaptable as you are could be instrumental in ensuring that it’s fit for your future.

More transparency
We all like to think we’re in control, but when it comes to your pension, do you know what it is that you’re invested in? The problem with a lot of pensions is that they’re a bit like a dark art – you pay into them in the hope that your money will grow and give you a nice retirement without really knowing what’s happening behind the scenes.

As life has become more and more data-driven and people want greater transparency from every business they engage with, pensions also need to offer this too. Being able to see how your pension is performing could be extremely beneficial to planning for your retirement and checking whether you’re on track to reach your saving goals.

Are there Ethical Options?
In industries, organisations, and movements all across the globe we’re seeing increased calls for more environmental awareness, a stronger approach to societal issues, and increased governance and reporting for more transparency. These three approaches – Environment, Social and Governance - make up the foundation of many forms of ethical investing called ESG investing.

This approach can apply to your pensions too – but not every provider offers ethical investments as an option. And not all ‘ethical’ options are created equal, so it could be worth doing a little bit of research before making any decisions. With this in mind, one thing you may want to look out for is whether your provider offers passive or active ethical investments (we’ll talk about this a bit more in a second).

While there are strong arguments for both active and passive ethical investing, with active investing you have greater transparency, as well as more frequent rigorous checks on each company you’re invested in. This helps to ensure that your ethical investments stay ethical, but also, as a shareholder you – or your fund manager – could use your influence to push for even more positive change.

Constantly monitoring
Performance is important for your pension, especially if you want it to work hard and help you have enough money for when you retire. If nobody is monitoring your pension’s investments, then you may not have the performance you were hoping for.

Now, monitoring isn’t always needed. If you’re invested in a passive fund that follows a stock market, for example, your returns will mirror that of the market – so if the market grows 4% in a year, so will your pension. But likewise, if it falls 4%, so will your pension.

Having a pension that is carefully and constantly monitored could help to prevent these swings. At Wealthify, we have a team of experts whose job is to keep an eye on investment performance and future trends. This way, if they spot an opportunity or identify any risks, they can quickly take action and make changes to help keep your pension on track.

Bringing all your pension together
When it comes to your retirement, do you really want to be trying to find all your different pensions and work out how much you get from each of them?

In fact, by the time you come to retire, you may have around 12 pensions that you’ll need to find[1] - and that’s no small feat! There’s no wonder that it’s estimated that £19billion in more than 1.6million pensions[2] is considered lost.

And as you’ll often only get a paper statement posted through your door once a year, all it takes is a change of address and a new job for this to become tricky.

But there is an easier way – and it’s called pension consolidation.

What’s that mean? Quite frankly, it’s just a jargony way of saying to have all your pensions in one place. Most workplace pensions allow you to transfer them to another pension – like an ethical personal pension – and you can do this with as many pensions as you want. So, instead of having 12 pensions, you could just have one. Not only does that make it easier to keep track of, but it could also help to save you money on fees.

Just FYI, a personal pension (also known as a 'Self-Invested Personal Pension' or 'SIPP') is a type of pension that you set up yourself and contribute to. It can be a great way to complement your existing workplace pensions by having more flexibility over how you contribute and invest.

If you’re looking to future proof your pension, then why not check out Wealthify’s ethical pensions? You can get started with just £50, have control over how often you pay in, and can even choose a level of risk that suits you. We’ll do all the hard work, constantly monitoring the market and doing the research and due diligence to ensure that your pension stays as ethical as possible.

 

 

  1. https://www.recruitment-international.co.uk/blog/2017/11/millennials-likely-to-have-12-jobs-in-their-working-lives-research-finds
  2. https://www.unbiased.co.uk/news/financial-adviser/billions-lost-in-forgotten-pensions#:~:text=UK%20workers%20have%20lost%20track,substantially%20worse%20off%20in%20retirement.

 

Please remember that past performance is not a reliable indicator of your future results.

With investing, your capital is at risk, so the value of your investments can go down as well as up, which means you could get back less than you initially invested.

Share this article on:

Wealthify Customer Reviews