All too often we get last-minute calls from individuals who want to pay into a pension ahead of the tax deadline on the 31st of October.
Retirement planning should be a continuous process, not something to think about only when your accountant is filing your tax returns. Here are five reasons why you should be more engaged and less reactive with your retirement planning.
- Unit Cost Averaging
Unit cost averaging is simply the term used to describe the strategy of making regular investments over a period of time as opposed to a single lump sum investment. While the amount of money you put in at each interval will be the same, the number of shares that money buys will not. That’s because market fluctuations dictate share prices, causing them to rise and fall. With this approach, you end up buying more shares when prices are low and fewer shares when prices are high.
By following this simple strategy, your focus is on accumulating assets on a regular basis, instead of trying to time the market. This strategy allows you to take a lot of emotion and fear out of investing because where the market goes in the short term is far less important to you. During periods of volatility and investment falls in value, you just end up buying more shares at a lower price.
- Stick with the Programme
We all need help in sticking with the programme. Setting up a monthly direct debit payment into your pension eliminates to risk of deferring your pension planning in October for another 12 months.
- Investment Strategy
When we review current pension portfolios for new clients, we often see a mismatch of investment strategies. Investing with a purpose or intentional investing is hard to achieve when your sole focus to pay ahead of the tax deadline. Planning ahead allows you time put in place an investment strategy that is not only in line with your risk profile but also takes into account your need, capacity and time horizon, which in the case of pensions, is often longer than personal investment time horizons.
- Policy Count
Annual single premium pension contributions often mean you end up with a large number of small pension contracts. We have come across cases where clients have forgotten some of them! Although having several pension policies can be useful in terms of flexibility with accessing at different times, there comes a point where it is simply cumbersome. By reducing the number of policies and being more intentional with your retirement planning, you not only reduce the admin, but you also get a clearer picture of the value of your pensions which keep you motivated to stick with the program.
- Review
Use your tax deadline, not as a reminder to pay a pension contribution, but as a trigger to review your planning to date. Ongoing reviews across all aspects of your financial planning, and making adjustments as needed, is the vital key to success.
In conclusion, retirement planning is not just an annual chore during tax season. For self-employed individuals, it’s a continuous process that requires careful consideration, regular contributions, and timely action. By starting early and staying proactive, you can build a secure financial future and enjoy the retirement you deserve. Don’t wait until the last minute; take charge of your retirement planning today.
