In my near 20 years in financial services, I have read many articles discussing the relative merits of investing in property and pensions.
Commentators from across the industry have argued the pros and cons of both and when The Sunday Times’ Money section interviews a celebrity, they always ask the question. The answers they receive are invariably property, based on the individual’s experience.
Personally, I think the question is unfair. I believe there are far too many variables to consider on both sides of the equation to give a plausible answer. My contention will always be that you should show the same level of attention to your pension as you would to a property.
If you have a pension, you should know the following:
- With whom is your money invested?
- How is your money invested?
- What are you paying in fees?
- How much are you contributing?
- What could it be worth and when?
To put this into context, you would never buy a property without knowing where it is located, how much it’s going to cost you and how much it could be worth.
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Since the government introduced autoenrollment for company sponsored pensions back in 2012, more people have provision of some description. You may also have multiple pensions, as few of us stay with one employer throughout our working lives.
Just as a property needs to be maintained, a pension requires the same level of oversight to ensure its capital value appreciates. You wouldn’t buy a house and let it fall into disrepair, or stay on the same mortgage deal when more competitive ones are available, yet that is what many people do with their pensions.
Without due care and attention, your money could be invested in closed life offices that are happy to continue taking exorbitant fees from their plans, or zombie funds that are coming to the end of their lifecycle and are run by actuaries. They are more concerned with shareholders’ returns than yours. Likewise, you could have what you think is an actively managed fund, but is in fact a closet tracker that is simply following an index, at a far greater cost to you than a passive index tracker.
Unlike a property, pensions are portable investments. If you are not happy with your provider, the risk you are taking, or the fees you are paying, you can transfer your investment to somewhere that represents far greater value for money.
Employing the services of a financial planner can help you consolidate disparate pension pots, to ensure you maximise the returns. If you’d like to learn more about how professional advice could benefit you, don’t hesitate to contact me on (01246) 298181 or email: ben.smalley@belmayne-ifa.com
