Finance Wanted.

By Steve A Wright

Despite the quite considerable contributions individuals are likely to be making to them and the accumulated value they are likely to have, it is surprising how few people keep an eye on how their pension fund investments are doing. The contributions are made on the same monthly basis, come what may, regardless of the investment's comparative performance. It seems that many people give no thought to the possibility of pension transfers and whether such a move would make sense for them.

Whether a pension transfer is something you should be considering, of course, will depend on the performance of your current pension fund. Together with your home, this is likely to be one of your larger investments and, as with any investment, you will want to make sure that your hard-earned money there is working as hard for you as it possibly can. With the value of your home, for example, you probably follow every twist and turn of local property prices and keep a fairly close watch on just how much it is worth. How many people do the same with their pension investments?

With your pension fund, it is not just the overall value and performance you will be interested in. Have you recently reviewed what management or administration fees you are paying? Could you get a better deal for less?

Ready to transfer?

If you believe it is time for a change, there are one or two things you should definitely do first before committing yourself to a transfer:

- Above all, do not consider transferring your pension without seeking the expert advice of a registered independent financial adviser;

- If you have not done so already, one of the first things your adviser will ask to see is a transfer value analysis. As the title suggests, this is an analysis which allows you to compare the value and performance of your current pension investments with the alternatives. It should include a figure called the "critical yield" (typically somewhere between 7% and 11%) which tells you how fast any replacement scheme would need to grow to match the performance of your present scheme. A good rule of thumb will be a figure of 8%. If your present scheme is returning anything less than this, then you might want to take the idea of a pension transfer further;

- What are your intentions regarding retirement? When do you hope to start drawing on your pension? If you are planning to retire early, for example, you will need to ensure that any replacement scheme to which you are intending to transfer is sufficiently flexible to allow this;

- With the help of your independent financial adviser, you will naturally want to check again the current financial position and performance of your present scheme. In the event that it is showing a surplus, with a higher value on assets than liabilities, then it could well prove worthwhile staying with your present pension fund.

Summary

It is certainly worth reviewing and monitoring your pension fund in the same way that you would any other investment, to consider the potential benefits of a pension transfer:

- Financial performance, management costs and flexibility might be a useful basis for comparison;

- Before doing anything, however, make sure that you seek the services of a reputable, independent financial adviser;

- Get a transfer value analysis of your current pension scheme;

- Take into account your actual retirement plans and any intention you might have to retire early.

Steve Wright is Managing Director of Wrightway Financial Consultants, Independent Financial Advisers specialising in Pensions, Investments, Mortgages and Insurance. One of their major areas is pension transfers.