The Land of No Returns

A STAGGERING amount of wealth disappeared down the drain last year from people who work for large-scale corporate enterprises.

WHY?

Auto-enrolment has no doubt seen a huge rise in the number of people entering a workplace pension plan, which is absolutely a good thing on the whole.

However, most people who enter a workplace pension have no idea where their contributions are being invested. In most cases, they end up in a default fund option designed as a ‘one-size-fits-all’ approach to building funds for retirement.

This is perhaps not such an issue for those starting their career journey, who will most likely have a significant portion of their contributions invested in global equities, setting them on the road to compounding returns over multiple decades. Fantastic!

Unfortunately, for those coming towards the twilight of their career, this has been nothing but a tale of woe in recent times. The dreaded ‘Lifestyling’ approach has wielded its axe of despair, slicing away at soon-to-be retirees’ global equity investments and dumping them into the Land of No Returns (cash and bonds).

After the economic events of last year, this has had a devastating impact on the value of people’s pension funds, right at the moment they need them most. Lifestyling used to be a reasonable concept in a world of little choice but to purchase a Lifetime Annuity. Now, however, most people opt to keep their pension funds invested throughout retirement, accessing funds flexibly via drawdown as their main retirement income strategy.

With many employees’ default investment strategies adopting this Lifestyling approach as they near retirement age, they’ve unwillingly allowed their funds to be moved into long-dated government bonds, which have seen prices plummet by as much as 49% in recent months. Treating Customers Fairly, indeed.

Fortunately, there is another way. An Independent Financial Planner can conduct an impartial review of your company pension plan offer advice as to where your hard-earned retirement fund is invested. There is no need to suffer the same fate as the unfortunate souls described above.

This really could be the difference between a retirement of joy and independence, and one of stress and poverty. Do not take it lightly.

Feel free to get in touch if you’re concerned about your retirement planning.