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7 pension mistakes to avoid before you retire.

Journalist: Marc Shoffman, Freelance

ended 21. June 2023

I am writing a piece for MoneyWeek this morning on 7 pension mistakes to avoid before you retire.

I am looking for tips from financial advisers and pension experts on mistakes people typically make with their pensions and retirement planning.

This could be things like, not monitoring fees, not changing strategy as you come to retire, accessing pensions too early or not having emergency savings etc.

Any other tips are welcome.

Kind regards

Marc

4 responses from the Newspage community

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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
1) Don't assume that taking 25% tax-free on day one is the right option. There are a number of ways and combinations money can be taken from a pension depending on your circumstances.

2) Not having a "war chest". For all of our clients planning for retirement, we help them put in place a war chest of cash and other more resilient investments that can be drawn on when stock markets take a dive. This avoids having to draw money from their main portfolio which is likely to have fallen in value, allowing it time to recover.

3) De-risking. We see many new clients come to us with pensions and investments that are set up to reduce the allocation to company shares as they approach their chosen retirement age. This is sometimes called "lifestyling". However, for most of our clients, they will still have money invested for 30+ years so this is completely inappropriate and leaves them with little chance of keeping their money growing above inflation, which is the whole reason we invest.
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Daniel Wiltshire
Actuary & IFA at Wiltshire Wealth
The biggest mistakes are often behavioural when it comes to retirement planning - and it follows a familiar pattern; apathy in the early years, followed by inertia in middle age, and then finally, panic (!) leading to knee-jerk investment decisions and overtrading.

A little bit of engagement and organization can save thousands but unfortunately, pensions tend to lose out to other competing priorities and slip down the 'to-do' list.
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Kevin Bailey
Managing Director at Wessex Investment Management
The most common mistakes to avoid before you retire are:
1. Putting off any planning until tomorrow (that's always too late as tomorrow never comes)
2. Thinking the state pension will be sufficient for you in retirement (it won't)
3. Thinking you'll inherit from your parents (they could outlive you or spend all their investments on long-term care)
4. Relying on the default fund within the workplace pension (it was designed to protect the employer first and foremost, not ensure the fund reflected your objectives)
5. Relying on the workplace pension contributions to build an adequate fund for retirement (it won't the levels are far too low and need supplementing)
6. Thinking paying the mortgage off is the biggest priority (it isn't) before topping up your pension
7. Not engaging with a financial adviser to help you plan ahead; identify what your objectives are, the fund required to provide the income in retirement and what is needed to bridge any potential shortfall
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
Moving into cash/bonds as you approach retirement. An average retirement will be 20+ years. Leaving your money in cash/bonds for this length of period is likely to guarantee you run out of money. Not seeking personal advice. A robo-investment cannot give you the personal advice that you need for your own retirement. Investing in the best fund from last year. Often the best performing fund of this year will be one of the worst performing funds of next year. Don't chase the top fund. Create a (good) portoflio and stick with it.