How regular reviews can reduce the uncertainty of retirement

“It shouldn’t be a surprise at the date of retirement what’s in your pension pot,” says Claire Trott, divisional director of retirement and holistic planning at St James’s Place.

“Those conversations should [be] had every year, looking at what’s going in, looking at the projections as they go.

“There will be an expectation, but that expectation will at worst be 12 months of change. It shouldn’t be a case that you don’t know what’s in there.”

Gavin Jobson-Wood, specialist business development manager at Scottish Widows, says: "A comprehensive and regular review process ought to identify any concerns around investment performance.

"This should incorporate a quantitative assessment of whether the chosen portfolio is on track to deliver the desired retirement planning goals. Investment and cash flow modelling tools may be of particular use in this regard. Naturally the adviser considerations will be different, depending on whether the client is saving towards retirement or actually in retirement and taking income withdrawals from a drawdown plan."    

Fiona Tait, technical director at Intelligent Pensions, notes that clients who are in the accumulation phase tend to have more simple objectives to build up as much money as possible within an acceptable level of risk.

“Reviews during this period should be regularly carried out, but need not be frequent, as the overall objective is unlikely to change much until the client is in sight of retirement.”

Trott recommends a conversation at least once a year, while life events such as family additions, marriages and deaths require a touchpoint to review any death benefit nominations, for example.

You have to go back all the time, revisit the goals, revisit the circumstances, revisit your advice. That’s how any adviser should ensure that they keep the client outcome exactly where the client expects.Andrew Megson, executive chairman at My Pension Expert

The sources of retirement income can also influence how often a review is required. Trott gives the example of a client in drawdown while markets are volatile, which may lead to more touchpoints and reassurances compared with a client taking a defined benefit pension or annuity.

Darren Dicks, partnerships and wealth management director at Age Partnership, notes that drawdown reviews during retirement are vital for a number of reasons.

“Your circumstances or objectives may have changed, resulting in a need for more or less income. You might be wanting or needing to make a one-off large payment, such as for a new car or a dream holiday.

“Risk tolerance may have shifted one way or another, or there might be a health-related change that opens up the attractiveness of another product, such as a lifetime annuity.”

Meanwhile Stewart Sanderson, senior private client director at Brooks Macdonald, recommends a conversation about a client’s pension at every opportunity. 

“It’s often the biggest or second biggest line of someone’s wealth. So behind the principal private residence, their house, the next biggest asset is very often their pension. So therefore at every opportunity you’re sitting down, reviewing the client’s balance sheet, you need to be talking about the pension.”

Keeping track of scattered pensions can also help to reduce uncertainty. Two-thirds of non-retirees have more than one pension pot, according to Interactive Investor’s Great British Retirement Survey 2021, while one in 20 (6 per cent) did not know how many pension pots they had.

“We’re forever saying to people, make sure you know where all your pensions are, even if you don’t want to move them to bring them together,” says Trott. 

“Make sure that everything’s up to date, that you’re getting the regular information. That’s the really important thing – the more information you get on a regular basis, then the less of a surprise any of this will be.”

Andrew Megson, executive chairman at My Pension Expert, agrees on the importance of regular interaction.

“You have to go back all the time, revisit the goals, revisit the circumstances, revisit your advice. That’s how any adviser should ensure that they keep the client outcome exactly where the client expects.”

As the age-old saying goes, the value of investments can go down as well as up, which can be evident when a pension pot is revisited.

No one wants to see their retirement plans shattered by a sudden stock market crash.Keith Barron, chartered financial planner at Beaufort Financial (Forth Valley)

As to whether a client sticks it out, Aaron Metcalfe, chief risk officer at My Pension Expert, says: “Each of our portfolios has a volatility range that we work within. I think if a client was outside of that range and was for a sustained period of time, that’s when an adviser might take action. If the portfolio is working within that range, that might be more evidence to stay the course.”

Regular reviews can also identify any underperformance at an early stage so action may be taken to improve the situation, Tait at Intelligent Pensions notes.

“This also means the client has time to come to terms with the reality of their situation rather than having to adjust their thinking at short notice,” she adds.

Meanwhile, in the lead up to retirement, Keith Barron, chartered financial planner at Beaufort Financial (Forth Valley), highlights the importance of knowing whether there are sufficient funds to produce the required level of income, as well as checking whether investments are aligned with the appropriate risk level for that particular life stage.

“No one wants to see their retirement plans shattered by a sudden stock market crash.”

Barron adds: “After you have retired, it’s important to ensure that your plans are on track and that you aren’t unduly depleting the fund for later years by taking too much income early on.

“Cash flow planning is a crucial part of this process and a great way to ensure that clients can visualise their pensions outlook. It’s a little bit like having sat nav in your car: you wouldn’t head off on a long journey without knowing where you were going.”

Chloe Cheung is a features writer at FTAdviser