Review pensions, investments to reduce risk

David Hill INLT 45-099-PSB

David Hill INLT 45-099-PSB

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There appears to be so much happening in the financial world these days, it can be hard to keep up.

Uncertainty over the Greek currency, the potential for a UK exit from the EU, volatile oil prices, unstable banks with exposure to Greek debt and a possible interest rate rise in the next 12 months. All of which means that investments and pension funds should be reviewed on a regular basis to ensure that investors are well positioned to be sheltered from the worst of any financial shock and to take advantage of these risks.

Yet we often meet with people who still have the same funds in their pensions now that they had 20 years ago.

A fund that was the right thing to have two decades back is very unlikely to be the best investment in today’s market. So why are there billions of pounds languishing in old pension pots and investment funds that haven’t been reviewed in years?

Some of the answers I have heard include:

- “We thought the pension company was reviewing the fund”; or

- “We thought our bank adviser was reviewing the fund.”

Most people, however, are simply put off by the complexity of pensions and investments and simply have other priorities. Some are put off by the perceived cost of advice and as a result are often taking far too much risk as they are approaching retirement.

Too much risk over the past seven years may not have been a bad thing, but in today’s climate, with the short term swings in investment values likely to occur, risk levels really should be monitored on a daily basis and in many cases reduced.

Care should be taken though if doing this yourself. Long-dated gilts, traditionally seen as a safe haven in volatile times and a low-risk counterbalance to holding shares, will perform very poorly when interest rates rise. This could lead to unexpected large capital losses if too much money is invested in these supposedly “safe” investments.

David Hill is a Chartered Financial Planner and Independent Investment Adviser at Hills Financial Planning, 15 Agnew Street, Larne. He can be contacted on 028 28276814, email david@hillsfinancialplanning.co.uk or see www.hillsfinancialplanning.co.uk