Autumn is the time of year when a lot of people re-engage with their pension plans. Notwithstanding the recent volatility in equity markets, strong returns in most asset classes have boosted the value of many Irish pensions this year. Here are the steps that some clients have taken to help them hit their retirement targets.

1. Understanding Pension Investment

It is particularly important to appreciate the level of investment risk contained in your plan, and the best way to do this is a complete review of your asset allocation. Can you easily access information in relation to equities, bonds, cash and alternatives for your overall pension investments, (and not just the individual funds you may hold? If not, it may be difficult to understand how much risk you are exposed to.

When asset prices are rising, there is always the danger of ‘risk drift’. This is where strong returns in one particular asset class leads to an ever-increasing concentration of the overall retirement fund in that class. It may be necessary to realign pension investments with a spread more appropriate to the desired level of risk.

Overconcentration is also an issue for pension investors who are close to retirement. Many are invested in lifestyle strategies where there is an automated transition towards long-dated bonds. Many of these lifestyle funds have sold off heavily in recent months as yields have increased on long-term bonds. Yields are expected to rise further, while bond prices and funds with exposure to long-dated bonds will fall.

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Action: Ask your portfolio manager to help you gather all the information for a full review of your pension investment strategy.

2. Achieving Your Targets

To get an understanding of how much savings will be required to meet your objectives, some questions are necessary:

• What are the expected returns on your assets?
• Should you make pension contributions or personal savings?
• What is the impact of the tax environment?

A good financial plan will take into account your financial background, establish your retirement objectives and give you greater clarity around decision-making. Using forecasting tools, your plan can also project the likely value of your savings at retirement and the level of income they could reasonably be expected to support.

Remember though that plans can change. You should be flexible and consider a range of scenarios to help the decision-making process:

• Will you need retirement income from 60 or 65?
• Will you stop working completely? Will you work in consultancy or part-time?
• How would an increase in your savings today affect your retirement assets?

Action: Ask your portfolio manager to discuss and develop a financial plan tailored to your needs.

3. Involving Your Spouse

Using pension savings to buy a guaranteed annuity income is more expensive than ever before. For many people this means keeping pensions savings invested in an ARF during retirement, and taking responsibility for providing their own annual income.

In this scenario, it is worth considering how your spouse would manage if you were not around. Would they be capable of stepping into your financial shoes and managing the retirement portfolio? It is important that your spouse understands the reasoning behind investment strategy, and the best way to do this is to include them in the process.

If you work with an adviser, make sure both partners attend meetings. This will introduce them to an expert whom they know and trust. it will also help them to develop crucial knowledge about how to build a bespoke, diversified investment portfolio and how to stick with the plan during periods of market volatility.

Action: Make sure your spouse is involved in your retirement decisions as some day they may need to take over completely.

4. Making The Most Of It

The main reason our clients are investing time to build the right strategy and working with our advisers is to reduce the worry that comes with major financial decisions. Taking the right steps now towards your retirement plan will give you confidence and it will give you comfort. Ultimately, it will make it easier to enjoy retirement, which is something we all want.