Company pension schemes are not what they used to be (if you are even fortunate to have one). They are one-size-fits-all generic investments which might not suit your retirement needs. Private pensions are also struggling these days. This might lead you to ask yourself:
Are your pensions working for you?
Are they optimised for maximum returns?
Are they suitably diversified to mitigate modern market risk?
Are they tax-efficient?
Will they stand up across borders and multiple tax jurisdictions?
With heightened instability in global markets, especially the uncertainty around weakening currencies, now is the time to review your pensions and make decisions about the future of your retirement.
Valuations of company pension schemes are falling. Companies can’t afford to put as much into pensions as before (if you are fortunate to have a company pension). Often, they are invested in generic, one-size-fits-all investments. Secure your assets – don’t leave them in company schemes; consolidate them into one vehicle where they’re proactively managed and diversified. This allows you to control the narrative, giving you more retirement options and greater currency flexibility.
Consolidation should only be an option after a careful analysis of your assets by a certified financial adviser, as it may not be the best move for everyone.
Darren Jones, Head of Technical Development at deVere, explains why consolidation isn’t just about admin; it’s about smarter investing, easier income planning and better control.
In a perfect world, investments would grow at a steady pace, free of any hiccups. In reality, markets are volatile, even more so over the last few years, thanks to geopolitical tensions, pandemics and natural disasters. The risk of losses is very real. Now, more than ever, risk management is essential for any investor to protect their capital.
Review your risk level. Your tolerance for investment risk can change as you approach retirement. Check your investment performance to ensure your pension is aligned with your long-term objectives.
Risk management plays an important role in portfolio growth. Not every investor has the same risk tolerance. Some are more adventurous and don’t mind taking higher risks, while others are more conservative in their approach. It is important to know what level of risk you are comfortable with, the purpose of the investment, and its term length.
Older Investors
Investors closer to retirement obviously want to continue growing their capital, but also want to protect the capital they have accumulated for retirement. With less time on their hands, the portfolio cannot ride out the highs and lows. These investors generally reduce the risk of losses by increasing the bond ratio and reducing the equity ratio. This potentially lowers the earning potential of the portfolio, but it grants more protection.
Older pension plans can sometimes have higher or less competitive charges.
Review investment management fees – Check what you are paying your adviser, discretionary manager, or investment platform. Make sure the service provided justifies the cost.
Compare fund charges – Look at the ongoing charges figure (OCF), management fees and other expenses associated with funds. Two funds with similar objectives can have very different costs.
Avoid unnecessary layers of fees – A portfolio can sometimes have charges from the adviser, platform, fund manager and underlying investments. Understand the total cost rather than looking at each fee separately.
Check platform and custody fees – Fixed account charges, percentage-based platform fees and dealing costs can add up, particularly for larger portfolios.
Review transaction costs – Frequent buying and selling can generate dealing costs, spreads and potentially unnecessary tax consequences. A long-term strategy can help reduce avoidable turnover.
Consolidate where appropriate – Holding numerous small accounts or overlapping investments may mean paying multiple platform or administration fees. Consolidation can sometimes reduce costs, although it should be assessed carefully before transferring anything.
Look for overlapping investments – Owning several funds that invest in many of the same companies can increase complexity without necessarily improving diversification. Simplifying the portfolio may reduce costs.
Reviewing your investments can help ensure your pension isn’t overly concentrated in one market, sector or asset.
One of the best ways to reduce risk is to ensure a retirement portfolio is diversified. Even an aggressive growth portfolio with a high percentage of equities should be diversified to help spread the risk of potential losses. This can be done through investing in:
Different asset classes – Different assets like equities, bonds, cash, gold and alternatives carry different levels of risk. The composition of the investment portfolio will be dependent on the investor’s risk tolerance.
Different geographical and economic regions – Various countries or economic regions react differently to market volatility. This helps spread the risk of losses.
Different sectors – Sectors react differently to market volatility, so it makes sense to spread investments over different sectors like tech, energy, communications, financials, etc. For example, we are in a huge tech drive thanks to AI, but not all tech companies will survive the tech bubble. While tech is earning fantastic returns, if the tech sector suddenly underperforms, great losses could occur.
Different companies – Further diversification can be done through investing in companies of different sizes, like small, medium and large-cap companies in different sectors.
deVere’s Nigel Green discusses the importance of diversification in the modern portfolio.
“Global markets now operate in an environment shaped by several powerful influences at once. Geopolitical developments, inflation dynamics, fiscal policy and liquidity conditions are all exerting measurable pressure on asset prices. Political decisions increasingly influence markets as well. Regulatory changes, trade policy and fiscal expansion can rapidly alter the outlook for entire sectors. Such complexity does not diminish the importance of diversification. It raises the standard required for constructing it effectively.
Spreading capital across genuinely different sources of risk remains one of the most reliable methods for protecting portfolios against unpredictable shocks.”
Use tax-efficient investment structures – Make full use of pensions, tax-advantaged investment accounts and other structures available in your country of residence.
Review where investments are held – Different assets can have different tax treatments depending on whether they are held inside or outside a pension or investment wrapper.
Plan withdrawals carefully – Taking income from different sources in the right order can potentially reduce your overall tax liability and avoid unnecessarily moving into higher tax bands.
Use available allowances and exemptions – Review relevant annual allowances, capital gains exemptions and other reliefs. These can change over time, so regular reviews are important.
Consider the tax treatment of investment income – Interest, dividends and capital gains may be taxed differently. The portfolio can potentially be structured to make better use of the available tax treatment.
Consider your tax residence – For internationally mobile investors and expatriates, tax efficiency can be particularly important. Moving between countries can change how pensions, investments, dividends and capital gains are taxed.
Pension arrangements and withdrawals can have significant tax implications, particularly if you have lived or worked in different countries.
Check your retirement goals – Your expected retirement age, lifestyle and income needs may have changed.
If you are closer to retirement than you think, it might be time for a review and a full examination of your retirement portfolio and pensions to assess their health.
Will you have enough saved up for the retirement lifestyle you want?
Do you have enough time to make up the shortfall?
Do you need to reassess your retirement needs and wants? You might have married, divorced or received an inheritance. This greatly affects your retirement needs. You might be in ill health and need more funds for medical bills and less money for travel.
Ensure your beneficiaries are up to date – Review who would receive your pension benefits and make sure your nominations reflect your wishes. This is especially important in some countries where beneficiaries are decided by the state or if there is no will present. An up-to-date will ensures that you leave your legacy to the beneficiaries of your choosing.
A pension review isn’t just about chasing better returns. It’s about making sure your pension remains aligned with your goals, risk profile, tax position and retirement plans. Chat to your deVere consultant to review your current pension standing and make the necessary changes to secure your retirement.
Please note, the above is for educational purposes only and does not constitute advice. You should always contact your adviser for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.
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