Most people, during their career, accumulate a number of different pension plans. Keeping your pension savings in a number of different plans may result in lost investment opportunities and unnecessary exposure to risk. However, not all consolidation of pensions will be in your best interests. You should always look carefully into the possible benefits and drawbacks and, if unsure, seek professional financial advice.
For many people, retirement now represents an opportunity to realise life-long ambitions, pursue new passions or help family members with their income needs. Since pensions freedoms, you now have more options than ever before to help you find a solution.
Make sure that any changes in your attitude to risk are accurately reflected
It is important to carry out regular portfolio reviews to consider the suitability of your investments and to make sure that any changes in your attitude to risk are accurately reflected. Over time, your attitude to risk is likely to change. If you are approaching retirement, for example, you may want to preserve capital or generate an income, while if you are investing for growth, you may need to take on more risk to potentially boost returns.
Not sacrificing your life principles in exchange for chasing the best financial returns
For investors concerned about global warming and other environmental issues, there are a plethora of ethical investments that cover a multitude of different strategies. The terms ‘ethical investment’ and ‘socially responsible investment’ (SRI) are often used interchangeably to mean an approach to selecting investments whereby the usual investment criteria are overlaid with an additional set of ethical or socially responsible criteria.
How do you generate a reliable income when interest rates are stuck at all-time lows and the Bank of England’s quantitative easing policy of ‘printing’ money is squeezing yields on government bonds (gilts) and other investments? Investors today can still rely on a well-balanced portfolio to meet their needs for income. However, they must be open-minded about the sources of that income and recognise that low-risk income generation is a thing of the past.
Utilising tax deferral benefits to minimise tax liabilities
Finding the right offshore investments can be a key factor in making the most of your wealth, and it’s not only for the wealthiest of investors. With a few well-advised decisions, you could broaden your investment portfolio.
Individual Savings Accounts (ISAs) have been around since 1999 and are tax-efficient investment wrappers in which you can hold a range of investments, including bonds, equities, property shares, multi-asset funds and even cash, giving you control over where your money is invested.
Investment bonds are designed to produce medium- to long-term capital growth, but can also be used to give you an income. They also include some life cover. There are other types of investment that have ‘bond’ in their name (such as guaranteed bonds, offshore bonds and corporate bonds), but these are very different. With an investment bond, you pay a lump sum to a life assurance company, and this is invested for you until you cash it in or die.
Reflecting popularity in the market
An investment trust is a company witha set number of shares. Unlike an open-ended investment fund, an investment trust is closed ended. This means there are a set number of shares available, which will remain the same no matter how many investors there are. This can have an impact on the price of the shares and the level of risk of the investment trust. Open-ended investment funds create and cancel units depending on the number of investors.
Participating in a wider range of investments
Unit trusts are collective investments that allow you to participate in a wider range of investments than can normally be achieved on your own with smaller sums of money. Pooling your money with others also reduces the risk.