What your pension advisor should be discussing with you

By February 3, 2020 March 23rd, 2020 Insights
Pension advisor - what should they be discussing

There aren’t many financial decisions as important as figuring out your pension. For most people, working with a pension advisor can be the key to ensuring a successful pension plan. But what makes a good pension advisor and what are the things your advisor should be talking about with you?

The benefits of hiring a pension advisor

Before we examine the topics your pension advisor should be discussing with you, it is a good idea to know why having an advisor makes sense in the first place. The truth is that saving for a pension is essential. The current State Pension can be up to £168.60 per week, which only amounts to little over £8,700 a year – not much to go by!

Saving for a pension is, therefore, necessary and while you could go about finding the right pensions and pension schemes alone, a pension advisor can be a big help. The advisor can:

  • Help you save time by scouting for the best options.
  • Find pensions that work for you since everyone’s circumstances are a little different.
  • Ensure you save money by finding not just the best deal but ways in which you can save with your taxes and so on.

Talking to a financial advisor with expertise in pensions can quite simply guarantee your pension works for you.

The 5 things your pension advisor should talk about

When you start looking for an advisor, it’s important to focus on finding an advisor that knows what they are doing. A great sign of a good pension advisor is their ability to discuss the key topics with you. Here are the five things your pension advisor should be discussing with you:

1. Your retirement plans and desires

The discussion should always start with your plans and desires. Your pension advisor should be interested to know when you are planning to retire and what kind of plans you have for retirement. This allows them to get an idea about the money you might need to set aside in order to live the kind lifestyle you want in retirement.

The point is not just to get a better idea of what kind of pension would work for you but to also understand how your expectations match with reality. Your pension advisor will get an idea of how much you’re willing to pay and for how long while being able to discuss these expectations with you realistically.

2. Your attitude to risk

There are many pension schemes out there with a range of risk associated with them. When you are choosing the right product or products, your pension advisor should be able to understand what kind of risks you are willing to take and whether you understand those risks well enough. If you are looking for a sizeable pot of wealth at the end of retirement, riskier investment products will often provide better returns. Together with the pension advisor, you should get an understanding of your ability to stand risks – financially and emotionally!

3. The different pension options available

As mentioned, the pension product market is vast with many options available for all sorts of workers, from workplace pensions to private pensions. A good pension advisor should discuss a range of options with you instead of simply focusing on one product or scheme. If you feel your pension advisor is not presenting enough options, then it might be time to look for other advisors.

When you are examining different options, your pension advisor should also explain the differences to you. The main ways in which pensions can differ include:

  • The ways you make payments into the scheme – from fixed to varied, from monthly to annual payments.
  • The rate of returns – from fixed rates to returns tied on investment performance, for example.
  • The access to your savings – from limited access at retirement to the ability to take out a lump sum, for instance.

4. The tax implications of pensions

A good pension advisor will also show you the tax implications of your pension scheme. In the UK, when you put money into your pension fund, 25% of it can be taken out tax-free, with the rest being taxable. Furthermore, the amount of money you inject into your fund can make a difference in terms of how much tax you pay. This is an essential part of figuring out the right pension scheme for you and your pension advisor should discuss it with you in detail.

5. Your understanding of the pension you are picking

Before you commit to a specific pension plan, your pension advisor should discuss all the above points with you and ensure you understand the plan. Pension documentation can look confusing so make sure to go over it thoroughly with your advisor. You should ask questions – no matter how big or small! If you at any point feel like you are being pushed towards a specific plan that you don’t understand, it’s perhaps time to start talking to a different advisor.

Where to find a pension advisor

The person who can help you with your pension planning should be a qualified financial advisor. All financial advisors in the UK need to be regulated by the Financial Conduct Authority and you should always check for additional qualifications as well. You want them to have expertise and experience when it comes to wealth management, pensions and taxation – this ensures you find someone who is able to help you with long-term financial goals and implement your plans in a tax-efficient way.

At Devonshire Green, we’re happy to help you with your retirement planning. Our pension advisors will look at your individual circumstances and draft a pension plan that works with your goals in mind. Contact us today to talk more about your retirement plans!