The Green Pension
Evaluation & Analysis (PEA)
Almost two decades of working with hundreds of clients on their retirement planning has enabled me to discover a number of common causes of concern with private pensions.
These range from a general feeling of unease at not knowing how the plan is doing (have you ever tried to make sense of a pension provider annual statement!) or what it will produce as income at retirement, through to not knowing what is actually in the pension or how it is doing, as well as not knowing the running costs of the plan or the content and often not receiving any ongoing service from their adviser.
I have found through experience that normally individuals who have one or more of the above concerns are probably right to be worried and their fears are not unfounded.
That is why I developed the Green Pension Evaluation and Analysis (PEA) service
- What exactly do you have?
- How much is it worth?
- Where is it, who is running it, what is it invested in?
- How is it doing?
- What will it give me?
At the end of the evaluation you will know
- what you have
- where it is
- what it will give you, when
- Will it do what you want it to do, when you want it to do it?
- Is it what you want?
- Is it enough? Will it be enough?
- What are the charges, are you paying too much?
- What are the Possible Gains and Possible Losses?
- How has it performed compared to it's peer group and more importantly,
- How has it performed relative to what you need and what you expected?
- Is it up to date and a modern, flexible plan?
- How much should you contribute? (if you wish to)
- How can you improve your pension and make it match your expectations
- more closely
At the end of the analysis you will know
- Is your pension what you want it to be
- Is it enough for what you need it to do
- How you can improve it
Combining both, at the end of the Green PEA you should know what you have, what it will give you and most importantly, if you need to take any action now, before it is too late.
In order to help you reach the above point we Evaluate what you have, discuss face to face what you want and then recommend how to make good any shortfalls. In doing this we need to carry out quite sophisticated and complex Analysis 'behind the scenes'.
One of the worst client scenarios I am faced with is when an individual approaches me to help provide retirement income and only then discovers they do not have enough. Pension plans can under-perform for a variety of reasons. One reason is that they do not receive the dedicated attention they deserve. The reality for many people is that if your pension plan is not managed and monitored correctly, your retirement income may be insufficient for your needs.
We wouldn't expect any other asset to be in good shape after being ignored for years, think of a car without a service or a property without maintenance, so why should a pension be any different? Especially as for many people the time your pension is growing is often longer than a mortgage and the time your pension will need to pay out for is longer than a working career.
Using a similar same analogy, there are a few individuals who are quite content to carry out their own more complex home improvements (think rewiring their own house rather than simply painting a bedroom) or vehicle servicing (think changing their oil not topping up the washer fluid) but for those that do not we suggest engaging a professional to assist in retirement planning.
The Analysis part of the Green PEA service is specially designed to help you understand any pension problems you may face and the attendant dangers. We call them Possible Pension Pitfalls. The service, as well as defining the problems, will help you avoid them and help give you financial security with your retirement income.
Possible Pension Pitfalls.
Whilst an individual may not realise this from the information provided by their pension company, I have found that there are four main reasons why people are disappointed with their own pensions.
- Lack of regular investment content monitoring and management
- Plan administration charges too high (often hidden)
- Pension does not match owner's expectations (often unrealised)
- Lack of clarity in pension provider documentation and correspondence
- Let us look at each pitfall more closely
Lack of regular investment content monitoring and management
Many pension companies or advisers do not review their clients' pension plans regularly. This is because many pension advisers earn commission on the initial sale of the plan only. Once a pension plan has been sold, they move on to new prospects and focus less on existing clients.
The Green PEA solution: Green Financial do not do this. We do not take initial commission on pensions and you only pay us for our ongoing service if you want it.
Plan administration charges too high
A lot of pensions are not providing value for money. We find many clients, especially those with older plans, are paying charges for pension administration that are far higher than is necessary. They may also be paying too much in fund costs. They are also receiving poor service. There is a common reason for these problems. Many people started their pension plans before government and market forces created more competitive charging structures. Many pensions have fiendishly complex charging schedules.
The Green PEA solution: At Green Financial "We believe you should find it easy to understand the total cost of your pension". Your pension should have one simple to understand charge for the product and content and one simple to understand charge for ongoing advice, if you wish it.
Pension not set up to match owner's expectations Most people have not had their risk profile (or in plain language, your attitude to volatility, or even plainer language, the possible gains and possible loss) comprehensively assessed. This may result in clients' pension portfolios being exposed to unintended investment risk or not maximising available gains. I see many pensions that just have an old 'default' fund, or a 'flavour of the month' from many years ago that have never been reviewed. A common belief is that market timing is critical to investment performance. However, extensive research shows that only a small percentage of investment performance is determined by market timing.
Conversely, the same studies show that the bulk of performance is determined by the allocation of assets in a portfolio. That's another important reason why it's important to review your asset allocation regularly.
The Green PEA solution: Green Financial use state of the art, online profiling to start to understand where your pension should be invested. It takes around 10-15 minutes to complete. But then more importantly we use good old fashioned conversation (!) to discuss with you exactly what you want so your pension will match your expectations.
This is a very different approach from many financial advisers who are often simply trying to sell (more) financial products.
Lack of clarity in pension documentation and correspondence
Time after time we hear clients saying they do not understand what they have in their pension, or what it will provide, or how it is doing.
The Green PEA solution: We will tell you what your pension will provide you with and perhaps most importantly, tell you how you are doing compared to YOUR aims (both in time and money), rather than comparing to an arbitrary benchmark of some kind, such as stock market performance or other people's pensions or funds. If you subscribe to our ongoing service you will receive a quarterly email that tells you how the plan has performed over the last quarter and since we started managing and monitoring it with you. Unlike most we give figures before and after charges so you can determine if we continue to provide value.
Sadly, many people never get around to addressing these problems. They are either too busy or they do not understand the true nature of the trouble. They assume that the person who sold them the pension is on top of their affairs and would contact them to adjust their plan if necessary.
That is why it is so important for you to look into your pension products and retirement income planning now. Acting now, before it is too late, could make a significant difference to your financial security and reliability of retirement income in the future. You could improve the performance of your plan's investments and may pay lower management fees. You'll definitely feel more informed and in control. That is why we strongly advocate that you think about the Green Pension Evaluation and Analysis Service.
The Green PEA Service is a fee-based (no commission), objective analysis of your risk profile, investment objectives, expectations for income in retirement and pension plan charges and investment performance. We will thoroughly assess the current state of your personal pension plan(s) and where necessary make detailed recommendations on how to overhaul the products and your investment performance.
First we help you establish and put in writing your risk profile, investment objectives and expectations. We then look at your pension plans and ascertain whether your asset allocation is right for you. If we judge the structure of your plan is correct, we will recommend against change. That way you know your current plan(s) are on track. If our analysis shows that you can increase investment returns or lower your administration costs we will say so. Our objectivity is crucial to your success. As we charge a fee for our service, we have no vested interest other than to see your pension investments grow. We simply give you our best advice.
The Green PEA service offers huge benefits to investors concerned about the prevailing financial climate and their own futures.
Once the Evaluation and Analysis are completed, you can then make an educated choice. This will ensure you have greater peace of mind. You will know which investments you hold and why. You will feel much clearer about your retirement and income goals and have greater confidence in achieving them.
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