Pensions have a lot in common with kitchens!

We live in a 1930s house. The kitchen is not original but it was there when we moved in 16 years ago and although we updated it a bit at that time it is overdue for a major overhaul. The basic design is from an earlier age and as we have added various items of equipment over the years this has not enhanced the look of it.

Kitchen renovation can be stressful

After looking at a lot of brochures, visiting a number of showrooms and sitting with a kitchen planner for about three hours while he painfully slowly put together our new kitchen on his computer, we were not much further forward and were experiencing a level of stress about something which should have been a pleasure.

I am sure that many people feel the same way about their pensions. They started off with their first pension plan, possibly via their employer, and they may have added other plans since, either from other periods of employment or one or more which they took out themselves, possibly during a period of self-employment. We regularly meet people who have upwards of three or four private pension plans as well as one or two memberships of previous employers’ schemes. Of course, by this stage the original design behind their pension has been lost and it is difficult for them to know whether their pension planning is still fit for purpose.

Kitchens underpin family life

That may sound like an exaggeration but in my experience the kitchen is the hub of most homes. It is where my sisters and I were drawn as children when Mum was cooking a meal or Dad was baking cheese straws or some delicious smelling cakes. Even now the first place our friends visit when they come for dinner is our kitchen. It’s just a friendly, homely place to be and whilst an Englishman’s home may no longer be his castle, there is a sense of security to be found in your own kitchen surrounded by cooking smells and a glass of red wine in your hand!

Advisers spend less time in clients’ homes these days as it is more efficient for all concerned to meet in an adviser’s office. However, on the few occasions when I do visit clients in their homes it is often to join them around their kitchen table with their financial papers spread out before them.

Good pension planning has the same effect of underpinning our lives once we stop working full time. Whatever the size of our eventual pension income, the fact that it is going to be paid to us for the rest of our lives, come what may, provides a level of security at the centre of our financial lives that money in a bank or in various investments simply cannot match.

Kitchens come in all shapes and sizes

Some people really fall on the their feet with their kitchen and move into a house with oak kitchen units and granite work-surfaces already in place so that nothing really needs changing and it just seems to look better as it ages. In pension terms these are the clients who find themselves in final salary occupational pension schemes. There really is nothing to do except take the inflation-linked pension and cash lump sum at the end of your working life and be for ever grateful that you decided to be a nurse, teacher, policeman, fireman, soldier or civil servant rather than a financial planner!

When we first moved into our present house we used the services of a company to replace all of the doors on the kitchen units and that really made a big improvement. I know that many people have done this and for some no other changes will ever be required. It is the pension equivalent of having a stakeholder pension. It does the job and is low cost. However, stakeholder pensions have their limitations and, to keep to the kitchen analogy, replacing the doors is fine if the underlying design is good and works efficiently for your needs, but these can change over time and often a more radical restructuring is eventually required. For many of our clients, as their pension pot has started to grow larger, the investment aspect takes on more importance than simply keeping the cost down.

Enter the stress reliever

We are pretty sure that we have found the solution to a less stressful way forward for our own kitchen requirements. We have been introduced to someone who runs a small but busy carpentry business. He not only fits kitchens, which he buys at trade price, but he has a good understanding of current regulations which affect the design of our kitchen and he has shown an innate sense of what will and won’t work for our particular needs. He is able to use his extensive carpenter’s knowledge to help us choose the right quality of units and surfaces so that our kitchen will still look good in years to come. Most importantly for us, his company is able to control all the other aspects of the job such as the flooring, wall tiles, electrics and plumbing. We have no desire to be involved in these things as it is not within our skills.

That’s a fair description of what we constantly seek to offer clients in terms of their pension planning. We seek to review clients’ existing pension plans with a view to creating something which is workmanlike and is designed to do a good job. Where we can transfer existing funds to a more modern pension plan we will, so that everything fits together and clients understand what they have and what they can expect in terms of eventual pension benefits. The tool we most often use to achieve the necessary consolidation is called a SIPP.

Excellent design

We were originally disappointed with the so-called design services for our kitchen as we seemed to be pushed into a standard mould that had little to do with our personal wishes and the only ideas seemed to be provided by us. That has now changed and we are being given ideas that we had not thought of which will enhance the use of the space we have available.

A Self Invested Personal Pension Plan (SIPP) is a pension designer’s dream. A SIPP is a modern, very flexible, type of personal pension plan. As with any new design, these were originally expensive when compared to the more basic type of pension. This has now begun to change and we, in particular, have sought to overcome the cost issue by using a SIPP which is part of our preferred online investment platform, the Nucleus Wrap.

Where we can transfer existing personal pension plans to the Nucleus SIPP this provides a lot of benefits in terms of cost, access and control for our clients. In some cases we cannot transfer pension funds because the existing product provider would impose a large termination penalty or there would be a loss of benefits such as a guaranteed annuity rate, but these are in the minority of cases.

Not only can we consolidate a number of pension pots into the Nucleus SIPP but once there we can make use of one of a range of risk-rated, professionally managed portfolios to provide an excellent investment medium for the client’s pension fund to grow over the years ahead. This is more important than ever now that many clients are delaying the purchase of an annuity with their pension funds and instead using pension drawdown to produce an income which still enables the owner to benefit from any investment growth in the pension fund.

We see such consolidation as an important part of our clients’ pension planning and so we have just revised the background information which we provide on SIPPs which you will find in our Guide: SIPPs (Self Invested Personal Pensions). You can obtain a copy of our Guide from our website by following this link www.arch-fp.co.uk/sipps.php and either read it there or download it to your computer.

If you would like to discuss your own pension planning please ask your usual Arch adviser, telephone 01483 204600 or email enquiries@arch-fp.co.uk.

VouchedFor

We were frustrated with our initial search for a good kitchen design company and even when we thought we had found one we began to lose confidence in the process. It is certainly no easier when looking for a good financial planner. Or at least it wasn’t until recently. There is a new website designed to give clients a forum to share their experience of their Independent Financial Advisers (IFAs).

The website has only just started so client comments are as yet few but it’s a place to start if you are looking for an IFA.

This entry was posted on 28/06/2011 at 05:56 pm and is filed under Blogroll. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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