A lesson on value from a 4-year-old

On a recent visit to a large and well-known toy store in London with my young nephew, the inevitable happened: he found a toy that he really wanted.

The excitement was incredible. It was as though all four years of his life had been underwhelming, and this colourful plastic was what he needed to be complete. In fairness, it did have moving parts, lights and buttons.

Of course, this being the large and well-known toy store that it is, the toy was expensive. £33 for colourful plastic (okay, yes, with moving parts and lights).

On the shelf directly below, though, was a variation. Cheekily tucked away to be slightly less visible was a toy that looked the same, was made by the same company, and had almost all of the same features. In fact, the only main difference was it was slightly smaller. It was still colourful plastic with moving parts, lights and buttons.

Except this one was close to half the price of its slightly-bigger brother. His parents breathed a sigh of relief.

As my nephew’s eyes lit up brighter than his new toy, it was obvious he didn’t care that he had the cheaper one. He inadvertently reminded me of a very valuable lesson: a higher cost doesn’t mean you’ll be any happier, or receiving something that’s better.

The same is true with pensions. A lot of people are paying for an expensive pension every year, and not getting any extra value. In fact, the schemes can be so expensive or deliver such little value that they are worth less and less each year.

Is your pension emptying your wallet?

The basic premise of a pension is simple: you pay money in on a regular basis and that money is invested. Over time it should grow, giving you enough to live off when you retire.

A lot can change over time, though, and many older pensions are expensive and not growing very well. A combination of low growth and high charges means that some pensions are actually shrinking in value every year – if you have one of these, you are literally losing money.

Left unchecked, this will be a nasty shock when you retire and find out the nest egg you’d be hoping for has all but disappeared.

That’s why it’s important to check in on your pension from time to time and make sure the money you worked hard for is now working hard for you.

The right pension could change your life

If having the wrong pension could erode your wealth, having the right pension could give you more than you realised was possible. Low charges and evidence-based investments mean your money could grow larger and let you keep more of it – even if your retirement isn’t very far away.

If retirement is further away, the right pension could have a profound impact.

How profound, exactly?

Well, reducing charges by just 1% could mean you have an extra £25,000 after 20 years*.

Finding out if your pension could be improved is easy – we take care of all the hard work for you.

Request your free guide, and find out if your pension is working as hard as it should be.

 


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Pension Information GuideTo get an idea of the type of pension you have download Your guide to personal pensions. This simple overview covers the basic features of the most common types of pension and looks at why you might think about switching to a modern private pension scheme – including having more flexibility around what happens to your pension when you die.

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Important Information

Based on a £50,000 sum at onset, growing at 6% per year before charges of 0.5% and 1.5% are applied.

The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section: https://www.portafina.co.uk/whats-new

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