Over the last three years we have had to reassess some of the key assumptions that underpin our financial existence. A common expression we all used was that a financial outcome was so certain it was “like money in the bank”. Or that an investment was so secure it was “safe as houses”.
Then came the credit crunch and a lot of assumptions went out the window. House prices fell dramatically and Banks had to be rescued.
So perhaps we also need to examine how secure our pension is? There are two significant aspects to pension security
(1)The risk of the Funds selected and
(2)Attacks from Creditors (Banks, Revenue etc)
(1)FUND RISK The most significant fact in determining the performance of your Pension/Retirement scheme is the choice of the funds.
Do you have a high risk fund and not realise it?
Are there more appropriate and safer funds to switch your funds into?
The answer to both questions in most cases is YES.
How do you ensure that your fund risk is managed?
First off you need to find out what type of funds are being used in your Pension. Are they Property, Equity, Bond or Cash funds. What are the charges associated with these funds? Are they suitable for your needs and circumstances.
We put together diversified pension plans which maximise the Return and minimise the Risk. We review these for you every year and ensure they are suitable for your needs.
(2)FUND SECURITY In terms of the security of the pension vehicle itself, there are a number of levels of protection that can be employed. The question is how much cost and effort do you want to incur to achieve the security you desire.
The benefits must outweight the costs.
The only way to minimise the risk of a claim on your Pension from Creditors or Litigation is to ensure your pension is established “under trust” with the assets not held on the pension providers balance sheet. Talk to us today if this is an area you are interested in.
You may have established your pension some years ago with the intention of using the funds to provide for your old age or perhaps provide for your dependants in the event of your untimely demise. You assumed it was protected in all circumstances.
The recent Brendan Murtagh case though highlights how dangerous these assumptions can be. In this case Mr Murtagh had retired and his pension assets were held in an Approved Retirement Fund (ARF). A court decided that the pension assets were to be made available to his creditors. An ARF is unlike a conventional trustee-administered pension fund and is the personal property of the individual making the contributions, hence it can be attacked by Creditors.
Were there steps Mr Murtagh could have taken to protect his pension assets and ensure greater security for his family? Depending on how and when he contributed the pension funds and the vehicle he held them in, the answer is broadly yes.
ACTION POINT Talk to our experienced and impartial Retirement Adviser Bill Anderson today and he will look at the security of your pension and see if there are moves that you can make to improve your level of protection.
He will also review your fund selection to ensure that they are suitable for 2011 and onwards.