What Should Be Covered in a Financial Review of Your Pensions and Policies?
(If you prefer to watch a 2-minute video. Joanne has this article summarised. Scroll to the end of the page)
Many people receive annual statements from their pension providers and assume everything is on track. However, a statement showing your pension’s value today is only one part of the picture.
A proper financial review should provide a clear understanding of how your pensions and investments are performing, what you are paying in charges, whether your funds remain suitable for your objectives, are your life and income protection polices still suitable for you situation, and whether there are opportunities to improve your retirement outcomes.
Why a Financial Review Matters
Your pension may be one of the largest assets you will ever own, yet many people do not review it regularly.
Over time, investment performance, charges, legislation and personal circumstances can change. A pension strategy that was suitable five or ten years ago may no longer be the best option today.
Regular reviews can help you:
- Improve long-term investment performance
- Reduce unnecessary charges
- Manage investment risk appropriately
- Consolidate multiple pensions
- Increase retirement income potential
- Identify tax planning opportunities
- Insure your Income is protected in the event you are unable to work
A Complete Summary of All Pension Benefits
Many individuals have built up several pensions during their working lives.
These may include:
- Company pension schemes
- Personal pensions
- PRSAs
- Executive pensions
- Additional Voluntary Contributions (AVCs)
- Buy-out bonds
- ARFs
A good financial review should bring everything together into a single report.
This allows you to see:
- Current fund values
- Fund performance this year vs last year
- Retirement benefits
- Projected retirement income
- Beneficiary nominations
- Income and life protection you have in place
- Retirement options available to you
A complete picture often highlights opportunities you might otherwise miss. Our Pension Research service page on our website explains what information an analysis can provide.
Reviewing Fund Performance
One of the most important areas of any review is investment performance.
Many pension holders know the value of their pension but have little visibility into how the individual funds are performing.
A proper review should include:
- The funds you are invested in
- Asset allocation across different investments
- Performance over 1, 3, 5 and longer-term periods
- Comparison against relevant benchmarks
- Year on year comparison
This provides a clearer understanding of whether the investments are delivering value for the level of risk being taken.
Understanding Your Fund Split
The way your pension is invested matters just as much as the overall value.
A review should examine:
- Exposure to equities
- Bonds and fixed interest investments
- Property funds
- Cash holdings
- Alternative investments
- Geographic diversification
Many investors discover that their pension has gradually become more conservative or, alternatively, more exposed to risk than they realised.
Your investment strategy should reflect:
- Your age
- Retirement timeline
- Income requirements
- Risk tolerance
- Overall financial position and what income you need in the future
Reviewing Fees and Charges
Charges can have a significant impact on long-term returns.
Many pension holders are unsure exactly what they are paying.
A review should identify:
- Annual management charges
- Allocation Rate (Setup Fee)
- Fund management charges
- Adviser servicing costs
- Any additional administration charges
Even a relatively small reduction in ongoing charges can make a substantial difference over the lifetime of a pension. For larger pension funds, understanding charges is particularly important.
Reviewing Your ARF (For Retirees)
For retirees, the Approved Retirement Fund (ARF) often becomes the centrepiece of retirement planning. Your ARF is designed to provide an income throughout retirement, and regular reviews are particularly important.
A lack of proper oversight can result in:
- Reduced retirement income
- Higher tax liabilities
- Excessive investment risk
- Poor fund performance
- Unnecessary charges
- A fund that may not last as long as expected
An ARF review should examine:
- Investment performance
- Income withdrawals
- Sustainability of the fund
- Charges and fees
- Tax efficiency
- Inheritance tax and planning
Identifying Opportunities for Improvement
A review is not simply about identifying problems. It should also uncover opportunities to improve your overall financial position.
These may include:
- Pension consolidation
- Fund restructuring
- Charge reductions
- Improved diversification
- Retirement income planning
- ARF optimisation and Inheritance planning opportunities
- Review of Income & protection policies
Even small improvements can have a meaningful impact over time.
The Value of Ongoing Reviews
Retirement planning is not a one-time exercise. Regular reviews help keep your pensions and investments aligned with your objectives as markets and personal circumstances evolve.
At Guardian Wealth, we provide detailed pension and investment reviews, including performance analysis, fund allocation reviews, charge assessments and retirement planning recommendations. Our clients are company directors, self-employed business owners and career professionals.
Our aim is to help you clearly understand exactly where you stand today and identify opportunities to improve your financial future.
If you would like a review of your pensions, investments or ARF, contact Guardian Wealth to arrange a consultation.
Important To Know
The value of your Approved Retirement Fund (ARF) or Vested PRSA may fall as well as rise.
Past performance is not a reliable guide to your fund’s future performance.
There is no guarantee that the accumulated retirement fund will provide any specific level of retirement income.
