Life cycle of a pension

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You can’t escape cycling these days with everything from the Tour de France, Tour of Britain and even dare I say the Tour of Yorkshire.

By Neil Welsh, financial advisor, PM+M Wealth Management.

What these events have in common are that they are multi-stage with different start and finish points, but they also require something of a development journey to be able to participate in them, which leads me into their comparison with, wait for it … pensions.

What? I hear you ask. Well bear with me and I will explain.

The events mentioned above represent the very pinnacle of cycle sport, but the road towards them starts from childhood and this is where my analogy begins.

A young cyclist progresses from wobbling on stabilisers to building their confidence on a simple and basic bike, let’s say a Halfords special.

This is the equivalent phase of someone’s first steps on their retirement planning journey (age 18-30) – they need a pension but it needs to be low-cost and uncomplicated (quite possibly an auto-enrolled workplace pension).

Let’s turn the pedals a little further and we find our young cyclist has matured a bit and started his or her first forays into racing and competition.

The basic bike is no longer appropriate and to be able to adapt to the challenges a lighter, better, faster is needed. The need to do some research and to take some advice was needed to buy something suitable from a specialist bike shop.

This is the point in your retirement journey where you have perhaps accumulated a few pensions and it is time (age 30-45) to consolidate into something better and with features more suitable for your needs. Most likely you may not understand quite what these needs are and so this is where advice can be invaluable.

Our cyclist is now about to break through into the big time. He/she is a success and they have the best bike available, in fact they may have several for different specialisms, custom-made and with a team of mechanics and staff to support them.

The bikes are more expensive but their relative value is still there in what they can do and how they can do it. We’re talking carbon fibre and electronic gearing potentially. This is the point (age 45-60) when our pension client has one eye on the prize – retirement.

They need a pension that offers flexibility and control, with access from age 55 to ‘dip-in’ to pay off the last part of a mortgage, for house deposit for the kids, university fees or perhaps even a dream bike. Importantly they also understand that their bike (pension) needs a mechanic (adviser) to keep it running sweetly.

Fast forward to the ultimate, the Tour de France. Three weeks of stages with everyone a different challenge. You have the bike, the fitness, the expectation of success, but this is the Tour de France and anything can happen – a crash, a mechanical, a puncture.

Without a team around you can’t hope to succeed. A tour de France stage has a start a middle and an end – you need to work hard at the start to stay in contact and to make the front group, there is an easing off in the middle and then a frantic sprint or mountain-top finish.

For this we have our retirement phase (60+ typically) where you need to navigate early retirement and the need to access more money to do the things you couldn’t when you were working; mid retirement when your expenditure tails off and you are riding comfortably in the peloton and then the spike of effort at the end which may see increased expenditure to meet care costs.

All of which requires somebody to be advising you from the following team car. That team car is us – PM+M Wealth Management, for your Tour de France.

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