How to simplify your pension landscape …
Every year, Goodbody conducts hundreds of financial reviews for clients and prospective clients – and the most common issues they come across focus on savings plans, inheritance and pensions.
Pensions can sometimes feel intimidating, but today people move employer more frequently, so they’re left with several pension pots. Our client Joan*, a senior executive in a blue-chip global company, hadn’t reviewed hers for some time and also had share options accumulating. From early conversations, we focused on her retirement planning and a share incentives strategy.
How to consolidate multiple pensions
Joan’s pension arrangements were complicated as two were Irish while one was in the UK. Joan wanted to understand the pros and cons of consolidating them or keeping them separate.
To begin, we reviewed Joan’s three policies to see how they were invested and their investment performance, as well as how much she pays in charges for each policy.
One policy had an attractive pricing policy and its investment performance was strong, so we advised Joan to maintain this pension. We then consolidated the other pensions to reduce her fees and align the investment approach.
We are often asked how easy it is to consolidate a UK pension. In general, most people under the age of 70 who are resident in Ireland are eligible to transfer back to an Irish pension structure without affecting arrangements. However, specific advice is required for considerations about tax implications for the treatment of the lump sum.
Implementing a share option strategy
Joan also received annual share options that vested after three years, but she was initially reluctant to sell them. Regardless of your affiliation to your employer, we recommend selling down one-third of the vesting options as they become available to sell. As investors, it’s our job to ensure that you hold a well-spread group of assets across the globe. Some years selling them will work in your favour and other years it will work against you. But by doing this each year, you will diversify your finances, thereby reducing risk – and that’s always a good thing.
After understanding the benefits of having diversified exposure to a bigger basket of companies and sectors, Joan sold down one-third of the vesting options, but she still had significant exposure to her company in the remaining vested shares. She may decide to increase the rate of disposal as part of a plan in the future.
As you can see, it can be beneficial to simplify your pension landscape – and when you need that conversation, we’re here to help!
*Names have been changed to protect client anonymity.
Whether you’re looking to grow, manage or protect your wealth, contact the all-female advisory experts at Goodbody to discover what’s possible for you, or to request a free financial consultation at investmentclub@goodbody.ie.