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Is Financial Trauma Hurting Your Pension Savings?

By October 2018November 18th, 2020No Comments
Beyond Accounting advice Is Financial Trauma Hurting Your Pension Savings

In the last couple of months at Beyond, we have conducted several annual reviews of clients’ personal pension funds and there was a common concern that I wanted to share so that you can be sure not to repeat the same mistake.

Is the recession influencing your pension saving plan?

If we look at the current state of the economy in Ireland, it has now been stated that as of around mid-2018 the country was officially out of recession and is experiencing economic growth likened to the period leading up to 2008. The last 10 years have been incredibly tough for the Irish economy, for small business, big business and for the everyday people working hard to provide for their families while attempting to save for their second life down the road – life in retirement.

Ten years on and stock markets around the world have recovered and are at new record highs. The skies are lined with cranes building new high rises and the restaurants are filled with people every night of the week. However, there is a legacy issue at play as a result of the tough times experienced after the downturn of the economy. Many people in Ireland have moved their pension assets either entirely to cash OR have structured their investment option in a way that is too conservative and, if left this way, it will have a significant impact on their retirement savings.

There is no question that Irish residents, like many other people around the world, have experienced financial trauma since the Global Financial Crisis in 2008 and it has sent ripples through the economy ever since. What it has also done, which will have even more lasting and negative effect, is cause people to fear any other asset class outside of cash (and even cash was considered risky when the banks were looking like they could have fallen off the cliff as well) and stop trusting the pension system in general. We’ve all heard the story of some nice person we know who lost all of their pension savings during the crash because they were invested in shares and property.

You can make smart investments for your retirement

Although these stories are terrible to hear, and we fear the same happening to our own money, we must look to remove emotion from the equation when choosing the investment for our pension savings and seek the help of advisors who can guide you on what the best strategy is for you. Here is a list of quick thoughts and potential actions for you to consider when it comes to your own pension fund…

Actions to boost your pension savings

  1. If you have your pension savings invested in cash or very conservative assets and you aren’t retired or nearing retirement in the next 5 years, you should look to review your investment options as soon as possible.
  2. If you don’t understand how your pension savings are invested or who they are invested with, request a copy of your pension statement and a review of your funds with someone who can walk you through each of them. It’s your money and you should understand where it is invested.
  3. If you are a business owner, your pension scheme is still one of the most, if not the most, attractive vehicles when it comes to saving on tax.
  4. If you are in the 20 – 50 year age bracket and in the midst of your working life, compound interest is your best friend when it comes to retirement savings. Do not let time pass and then try to play catch up when you hit 50+. By then it is too late. Take the simple steps now to get yourself in the right investment option and pension plan.
  5. If you don’t have a pension at all, then undertake this simple exercise – think about the kind of life you’d like to live in retirement and then ask yourself if you could live it only receiving the state pension of €12,000 per year.
If you’d like help working through any of the above points for yourself or your staff please get in touch with the Beyond pension team. Call us today on 01 639 2963 to find out how we can get your pension savings working for you!