What are the first steps in a Pension review?

The first step towards getting Pension Advice is having your pension arrangements reviewed by a qualified Independent Financial Adviser, is to allow your adviser to gather together all the necessary information to conduct your review.

It may be that you already have your annual pension statements, but this only provides you with headline information, such as the value of your pension. There is much more detail that your adviser will need to see, which is why you will be asked to sign what’s known as a Letter of Authority.

Basically, this is a simple standard instruction to your Pension Provider, to send all the information relating to your pension to your adviser. Signing a Letter of Authority does not commit you to doing business with your adviser, it simply allows them to gather the necessary information.

There is a lot of information which could be relevant to your pension and ultimately the advice you receive, which will be provided by your Pension Provider, above and beyond the simple value of your pension.

For example, your adviser will receive information about the funds in which your pension is invested, details of the charges being applied and any penalty charges. In addition, there may be information about whether you are even allowed to transfer your pension at all, and what other benefits there may be, such as spousal or child benefits. There may be details about the funding status of your pension scheme which may be relevant, depending on whether the scheme is in deficit or surplus. There may also be information about commutation factors, which affect how your lump sum tax free cash is calculated, or details of safeguarded benefits, like for example, guaranteed annuity or guaranteed minimum pension rates, or waiver of premium benefits. There are lots of other details that may be included by your Pension Provider, this is just an example of a few.

So, you can see, there is potentially a lot of information about your pension, beyond its headline value, which your Independent Financial Adviser will need to consider before providing you with any advice.

Once your adviser receives the information from your Pension Provider they will then be able to give you pension review. It’s up to you at this stage whether you want to ask your adviser to then provide you with detailed advice. Your adviser will charge for advice and they will explain their charges in full, allowing you time to make a decision on whether you want to proceed.

If you do decide to proceed, your adviser will move onto the next stage, which is to gather information from you about your circumstances, your goals and aspirations in retirement and your attitude to risk. This fact-finding exercise is a fundamentally important part of the advice process, because it allows your financial adviser to understand exactly what you want and then apply your requirements to the assessment of your existing pension arrangements and the possible recommendation of any changes.

The Letter of Authority is a simple document, which contains details of your name and address, date of birth, National Insurance numbers and details of your pension policy. Please, don’t be concerned about signing a Letter of Authority, it is a vital first step towards your pension review.