Independent Pension Advice

Could your retirement savings and investments be vulnerable to a cyber attack? The bad news is that most likely the answer is yes, almost certainly.

Think of the data held online by the occupational pensions sector (accounting for £3 trillion in assets): names, dates of birth, bank details, national insurance numbers, and more.

It’s a hacker’s dream. Particularly when you factor in that the pensions industry has been slower than other financial services sectors in addressing these kinds of attacks. There are all sorts of possible reasons for this state of affairs. One might be that scheme trustees believe other parties (e.g. scheme administrators) hold primary responsibility for cyber security. Another possible factor is that regulators have been accused of not prioritising the issue of cyber security enough.

Whatever the reasons, it’s no surprise, therefore, that leading financial companies have predicted that cyber security will be one of the leading issues faced by pension technology in 2017.

There are some important developments on the horizon, that you as a pension holder will likely want to be aware of. One is the EU’s new GDPR which is coming into effect in the UK in May of next year (General Data Protection Regulation). This will apply stringent new regulations surrounding the handling and protection of personal data, which will also apply to pension schemes.

 

How Might A Cyber Attack On Your Pension Occur?

However, even with the GDPR coming into effect, pension holder and those seeking pension advice need to be aware of the risks. Pension schemes need to take vigilant action to prevent a cyber attack which might have devastating effect upon their clients’ finances.

A cyber attack can take a number of forms. It might involve a security breach, where your banking details are stolen. It might involve use of fraudulent transfer requests, which lead to a loss of assets. This latter scenario might occur over the course of many years, going unnoticed and undetected until the pension scheme member seeks retirement.

Hackers and cyber criminals are well aware of the sinister “opportunity” presented to them by pension schemes. Don’t assume this is the stereotypical, hormonal teenager messing around on their laptop in his or her bedroom.

Indeed, many cyber criminals operate in highly organised groups, working together in a clandestine, almost business-like structure. One person or team might be assigned to identifying new attack opportunities, whilst others might be dedicated to assessing the monetary prize potential and target resilience.

Remember, cyber criminals only need to make one successful raid on a pension scheme to cause eye-watering, life-shattering damage to many people’s lives. Fortunately, at the time of writing there has been no major attack publicised on a pension scheme. The latter should therefore take the opportunity to take sensible, preventative measures. If they are worried about short-term losses today, they should be even more mindful of the more horrendous situation a successful attack would produce later on.

 

What Can Be Done?

Acting now takes several forms. The first step forward is for pension schemes to raise the issue of cyber security higher up on their agendas. The matter should be discussed alongside other business-critical matters such as budgets, deficits and investment strategies.

Another important step is to ensure that adequate, up-to-date IT policies and procedures are in place should the scheme find itself the victim of a cyber attack. There needs to be resilient communication protocols in place as well, ensuring that coordinated, swift action is taken to protect client assets and personal data. Moreover, staff and those involved in the scheme’s administration should all receive appropriate training, so they are equipped to handle a cyber attack and stay ahead of hackers.

Scheme administrators play an absolutely crucial role in protecting against cyber attacks. Indeed, regular questions need to be asked of such teams:

• Are they aware of the risks surrounding cyber, and what preventative measures have they taken?
• Are their IT infrastructure and systems closely monitored? Are these subject to regular, rigorous testing for attack vulnerability?
• Is there an established scheme for incident management?
• Is there a culture of staying up to date, and complying with, industry best practice?
• Are there clear, resilient governance structures adequately set up?
• Are they appropriately certified (e.g. the UK government’s Cyber Essentials Scheme).

It will also be important for pension scheme to carefully review and monitor their third party relationships. After all, hackers often like to focus their attacks on a target’s supply chain.

The frightening reality is, once an attacker gets through the wall, they can wait undetected within the system for long periods of time – waiting for the optimal, opportune moment to strike. When this eventually happens, control of the system is seized. The trustees of the pension scheme might then be threatened with a system shut down unless they yield to the hackers’ demands.

Think of how much havoc would be wreaked if a cyber attack like this happened just prior to payroll…

 

Planning your retirement can be a daunting endeavour. you are faced with many questions, such as:

Should I choose a stakeholder or personal pension?
How do I effectively plan my savings?
What income streams will be available to me at retirement?
Should I delay my state pension?

In this article, we here at PensionAdvice.org will outline some of your options when planning your retirement income. You will also find some help with discerning when you should seek independent pension advice from a professional financial adviser.

Getting Started – What Kind Of Help Is Available?

PensionAdvice.org exists to refer people to a qualified, local financial adviser. We only ever refer you to an independent financial adviser who is regulated by the Financial Conduct Authority.

Although our service is free, if you receive regulated, independent pension advice then you should expect to pay for it. However, if you are just looking for general answers to questions you have about pensions in general, you should consider visiting the Money Advice Service or the Pension Advisory Service.

How Much Money Will I Need To Retire Comfortably?

Most people will need more than the State Pension when they retire, which will give you (presently) a maximum of £122.30 per week (excluding the Additional State Pension). If you retire after 2016, then you will likely be able to claim the New State Pension.

Because most people will require more than the State Pension to live from, they will likely also need to pay into a defined contribution scheme. This builds up a pension pot in partnership with your employer over the course of your working life.

The other possibility is that you have a final salary (or defined benefit) pension, which gives you a guaranteed income from retirement onwards. However, these schemes are becoming increasingly rare.

Companies are less inclined to offer final salary schemes to employees, as people generally now live longer – increasing the strain on company budgets. In addition, people are also much more mobile throughout their careers, moving from job to job and even changing industries entirely.

Due to this shift in employment patterns, people will defined contribution pensions often build up several different pension pots with different employers. This can present some complex situations, where often people forget how many pension pots they have and how much they’ve paid into each one.

You also then face further questions, even if you have kept accurate records. Should I keep my pension pots separate, or should I amalgamate them into one? What are the tax implications of each option? This is where seeking independent pension advice can be a real benefit.

Workplace & Personal Pension Pots – What Are The Differences?

From 2018, employers in the UK must automatically enrol their employees onto a workplace pension. There are some exceptions to this requirement from your employer, however. For instance, if you are under the age of 22 and if you earn below £10K a year.

Here, your employer will make payments into your pension pot on top of what you pay. You may be able to make additional contributions if you wish, and there are special protections available to mitigate your investments against risk (e.g. in the even your employer goes bust).

For many people, setting up a personal pension in addition to their workplace pension is a viable way forward. This is a pension that you can arrange yourself, or by working with a professional offering independent pension advice. (Bear in mind that sometimes employers offer employees a personal pension as a workplace pension!).

In the case of personal pensions, your pension provider puts your money into investments such as bonds and shares. The idea being that, over time, hopefully your investments will increase in value.

The amount you eventually get from your personal pension(s) depends on a range of factors, such as how much you put in, how the investment’s funds perform over time, and how/when you decide to withdraw your money.

Different kinds of personal pensions exist, so getting help from an independent pension adviser can be really beneficial in helping you identify the best way forward for your particular situation.

However, broadly personal pensions can be distinguished by stakeholder pensions, and self-invested pensions (SIPPs). The former must meet specific conditions set down by the UK government (e.g. limits of charges), whilst the latter give you more control over the investments that comprise your fund.

Paying into a personal pension can be done in different ways. It all depends on the person, their needs and their specific goals. Generally, people tend to make regular payments into a personal pension, or commit individual lump sums.

Bear in mind that there are tax relief factors to consider when paying money into a personal pension, so seek independent pension advice from a regulated professional if you are looking to discern the best option for your retirement.

Also, if you are self employed you may particularly find it to be important to consider a personal pension scheme. After all, you are unlikely to to be able to benefit from the workplace pension contributions of an employer right now!

With so much readily, freely available today on the internet, it can be tempting to think you can manage your pension, investments and retirement planning without professional advice.

An important question to ask is, will the advice you are given pay for itself? The services of an independent financial adviser will often cost hundreds, if not thousands, of pounds. Will handing them this money result in more money which pays for this advice, and then some?

Certainly, a good place to start is to get free pension advice. This kind of advice obviously pays for itself, as it only costs you time and effort (and perhaps a bus fare to meet a government adviser).

For instance, by using the government’s non-paid services such as Pension Wise and the Pension Advisory Service. You can speak to an advisor over the phone, a face to face appointment, or even a web chat if you’re more tech savvy!

This is helpful if you are not familiar with the current pension rules, giving you the pros and cons for different options you face. For instance, these services can help you see the differences between annuities and drawdown, and give you some benefits and disadvantages to each (in broad terms).

However, this is essentially where the usefulness of these services ends. They cannot provide what is known as “regulated financial advice,” which will recommend a financial product or particular course of action you should take.

With this kind of advice, you have certain rights if things go wrong as a result of acting upon the advice you have been given. Free pension advice rarely, if ever, will give you these kinds of rights. This kind of advice is valuable, and so comes with a price tag.

The Rise Of “Robot” Pension Advice

With rapid advances in technology have brought a new kind of adviser into the spotlight – “robot advisers” who use algorithms, formulas and computer modelling to assist you in making decisions about your pension and retirement.

Typically, these services work by first asking you to fill in an online questionnaire. For instance, they will likely ask you about how you feel about risk, and how many years you were planning on investing for. Once you have given your answers, the robot adviser can direct you to a portfolio model which it deems suitable to your needs and goals.

These services can range in their price tag, and companies which offer them include Rplan, Simply EQ, Nutmeg and Money-On-Toast. Usually, they’ll take 1% plus investment charges. This is typically cheaper than going through a regulated, independent financial adviser directly. However, whilst your options are wider than what you get with the free pension advice routes above, your options are more limited than going through a professional intermediary.

If the advice given by these robotic services are based on your attitude to risk, as well as your financial position, then they are regulated. This gives you some protection should the advice you receive turn awry. However, make sure you fully understand your rights, and the risks involved, before setting yourself upon this kind of advice.

For some people, this kind of pension advice can be worthwhile and cost effective. However, if you want the best range of financial options to choose from, and/or your finances are quite complex, then you might need further help.

Full, Independent Financial Advice

An independent financial adviser is authorised by the Financial Conduct Authority (FCA) to advise you on investment options (e.g. individual shares and funds), as well as appropriate financial/pension products (e.g. drawdown and annuity products). They can even build a full financial plan for you, including long-term budgeting, tax planning and investing. They can also be used to monitor the performance of your finances on a regular basis, even making adjustments accordingly in light of changes in the market.

PensionAdvice.org exists to refer people seeking pension advice to professional financial advisers such as these. We only ever recommend you to a recommended, FCA-regulated financial adviser, and go out of our way to ensure the person you speak to is as local and relevant as possible to your needs.

The cost of a financial adviser is hard to compare, as their charges vary. Some IFAs choose to charge hourly (this can be around £200 an hour), whilst for other tasks IFAs might choose to levy a one-off fee. An initial review is, on average, about £500.

For pension advice on how to invest a £100,000 pension fund, a fee of around £1000 is fairly common. However, if you are unsure of your goals or if you do not know what you want to do with your savings, the fee can be a lot higher. Maybe even double. This is because the adviser has to put in more work to help you figure this out.

Sometimes, going through an IFA can give you preferential rates on certain financial products. If an adviser can assist you in lower the taxes you will pay in retirement, then the professional advice can certainly more than pay for itself.