Your portfolio
The lack of choice and flexibility
that are cited as the major
weaknesses of pensions could
actually be their greatest
strengths, writes Pádraig Floyd
For your
own good
M
any experienced
investors are suspicious
of pensions as a vehicle
for increasing their
wealth due to the lack of choice and
flexibility compared with other tax
wrappers such as ISAs.
Yet it is this lack of choice and
flexibility that arguably makes pensions
so effective, as it helps investors protect
their portfolio from what is often their
worst enemy – themselves.
Pensions are more flexible than they
used to be, now allowing full access at
the age of 55 and the option to pass on
the investments at your death, making
them a useful estate planning tool.
However, while the pension
freedoms have been welcomed by
savers, they have also highlighted why
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[ PENSIONS ]
While the pension
freedoms have been
welcomed by savers, they
have also highlighted why
greater control over your
investments is not always a
good thing
greater control over your investments
is not always a good thing.
Research from Canada Life shows
more than two-thirds of savers who
accessed their pensions after 2015 did
not take any independent advice. This
can in part be attributed to issues of
trust and the fact many savers see no
value in paying for financial advice.
But what they save in terms of cost,
they may be giving up in protection.
Don’t believe the hype
As humans, we are bad at coping with
failure. Our brains allow us to avoid
owning up to mistakes, which can be
damaging to investment returns.
Knowing the market is going to
move up or down is not an efficient
determination for investment strategy.
Annual research used to compile
DALBAR’s Quantitative Analysis of
Investor Behaviour shows a consistent
trend of poor decision-making by
trustnet.com