Grant Walker: Why it pays to review your investments

Are you someone who contributes to a pension plan or an investment plan because it seemed like a good idea at the time but has never taken the time or trouble to review the investment performance?

When providing financial advice to new clients the client often says that "I took this out years ago and just pay into it because I know that I need to do something". Whether this is a pension, unit trust, ISA, endowment or any other investment plan, it pays to review it regularly. Do you know what level of income you are likely to receive in retirement? If your answer is 'no' then you are in the majority. Many clients only focus on pensions for retirement income, however where a client has other assets then it may be possible to generate an income from these. Some of these assets may offer a tax-efficient way of taking the income.

Within our company we offer a pension audit service to new and existing clients. As part of the audit we review the existing plans to ensure it offers competitive charges and we also consider the existing investment funds to see if they are compatible with the client's attitude-to-risk profile. Many pension (and endowment) providers have totally altered the asset mix within their with-profits funds and now offer only a limited chance of achieving good investment performance in the years ahead. In some cases, the provider may have been paying a zero per cent bonus rate for many years. This may be due to the provider trying to fund the high cost of providing a guaranteed annuity rate or a guaranteed growth rate. Do you know if you should keep paying into the plan or even continuing with the policy? A good independent financial adviser will be well qualified to provide advice in this area and should be capable of carrying out a pension audit.

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In recent years we have seen a rise in clients seeking advice for ISA and pension plans that they have put in place without any advice. Some clients are more than capable of setting up a plan and choosing the investment fund to go inside it. Others are seduced by the glossy marketing material and websites that these providers offer. The ability to consolidate existing pensions into the new plan often appears the best option, however in many cases the existing plan may offer value guarantees that are lost on transfer and the new plan will often be more expensive. If you have not received advice when setting up the new plan you will be unable to make any complaint to the providers if it all goes wrong because they are only offering an information service and are not liable for any actions you have taken.

It cannot be denied that clients will have to pay for advice, but this is often a small price in comparison to what good advice can save clients. Are you aware that at retirement that you do not necessarily have to purchase an annuity? If your answer is "yes", you're in the minority.Your health or lifestyle could result in you receiving a higher annuity in retirement. A good independent financial adviser will be able to guide you through the retirement options and be able to source you the highest annuity rate.

When did you last review your pension or investment plan?

Grant Walker

Edinburgh Risk Management