“To err is human.” As humans, we sometimes make mistakes. These mistakes can be as minor as zipping off an e-mail to the wrong address. They can be as major as setting the wrong coordinates for a bomb. Perhaps the best way to gauge mistakes is by the consequences that they create. The errors that we make can result in insignificant consequences that affect us minimally; or with drastic or devastating results.
Securing a pension remains one of the most significant actions that we can take. For most Britons, a pension functions as their primary method in preparing for their retirement. With the cost of living skyrocketing and the recent downturn in the housing industry, there is little room for error. Thus, it is vital that we minimize how many errors we make, in securing and maintaining our pensions. Here are some ways to avoid making pension slip-ups:
1. Never shop for a pension without an IFA’s help
You probably would personally add a new storey to your home, or replace the engine in your vehicle, right? Likewise, you should seek the professional guidance of an Independent Financial Adviser (IFA), when choosing the best pension. You could certainly choose a different source for your pension. However, it would be wisest to secure your pension through an IFA.
What is so special about an IFA? They have the knowledge, experience, and tools to help you select pensions that perform well and suit your particular pension needs. Furthermore, by law they must give you the optimum advice they can. In addition, the “independent” in IFA ensures that the adviser will scour the entire pension sector of the market, to locate your pension.
Could something go wrong after choosing an IFA? That case is possible (though less likely) with an IFA. Still, by selecting an IFA, there is also a greater likelihood that you will receive compensation if you receive unscrupulous advice. In a nutshell, an IFA will put your interests ahead of pension companies’, insurance companies’, or even themselves (“compensation” is thy name).
2. Never hire an IFA without doing your homework
While hiring an IFA is an excellent choice when selecting a pension scheme, it is important that you choose the right one. However, you should still perform some checks, to avoid any potential pitfalls.
How can you sort out the alphabet-soup of qualifications behind an IFA’s name, when you find a pensions adviser? An IFA should certainly have obtained a Financial Planning Certificate (FPC). This is the standard for sales of financial products. By law, an IFA cannot sell pensions without having obtained a FPC first. Also, a fully-certified IFA must have completed all three parts of the FPC. Other significant qualifications for IFAs include:
AFPC: Advanced Financial Planning Certificate
AIFA: Associate of the Institute or Faculty of Actuaries
AIFP: Associate of the Institute of Financial Planning
ALIA: Associate of the Life Insurance Association
CTP: Certificate of Financial Planning
FIFA: Fellow of the Institute or Faculty of Actuaries
FILA: Fellow of the Life Insurance Association
MLIA: Member of the Life Insurance Association
Keep in mind that having certification in addition to the FPC does not qualify a person as an outstanding IFA. However, it does indicate that he or she has long-term plans in the field.
3. Never fail to look for maximum flexibility
Finding pensions with maximum flexibility is as vital as finding the best rates for annuities uk. In particular, the Stakeholder Pensions provide a significant amount of flexibility for their policyholders. In fact, this has made the overall flexibility of Personal Pensions, much greater. Such pensions provide the following benefits:
Let you choose to retire when you want to, without being penalized
Let you transfer your pension within the same pension provider’s range of pensions, without penalty.
Let your transfer funds to a different pension provider. This could or could not include a penalty.
Let you transfer a Stakeholder Pension within one pension provider, or between pension providers.
Let you lower your payments or contributions, without penalty (i.e. take a vacation from your career).
4. Never fail to look for minimum charges
Pension provides charge pension holders, for managing their pension funds. Two basic types of charges exist. You pay “initial charges” when you take out your pension. Meanwhile, you must pay “ongoing charges” for the management of your pension fund. Common charges include:
The pension provider’s management setup charges (these can vary significantly)
Annual management charges
The IFA’s commission or fees (these can be continuous after the fund’s setup)
Stakeholder Pensions’ maximum charge of 1% annually
To find the best pension, use a pensions calculator and be aware of how significantly charges can affect how profitable your pension is. In particular, be wary of “front-end loaded charging.” This involves pension providers requiring you to make the majority of your charges within the first year or two that you have the pension. You can typically locate such charges in the documents that list the key features of various pension plans.
Furthermore, be wary of one particular argument that pension providers may make. They might argue that a pension scheme that forms outstandingly will compensate for high pension charges. While this is true, there is no guarantee that your pension account will perform at a particular level. Because there are no guarantees in the world of pensions, it is advisable for you to minimize the charges for your pension.
5. Never hunt for a pension without a plan of attack
When choosing and purchasing a pension, you should follow a basic plan. First, locate a qualified and reliable IFA. Then review your pension “shopping list” with the IFA. Afterwards, have the IFA create a letter of recommendation about which pension you should select. Review this recommendation and then sign on the dotted line or look elsewhere.
6. Never forget to address any major questions, concerns, or problems to the pension service.
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