Pensions tips: What to do in your 40s

Having explored retirement planning in your 20s and your 30s, this post looks at what to do in your 40s.

Once you reach your 40s there is a good chance you've had multiple jobs, and each one may have provided its own company pension. A lot of people don't pay attention to these, reasoning that they will get them when they retire, but that can impact your investment. The new rules outlined in the March Budget allow for three smaller pension funds to be rolled into one, which reduces fees and could increase the eventual fund size because interest is applied to a larger sum. If you think you have pensions from past jobs but have lost them, there is a free government service to trace them.

If you started a pension when you were younger, you may have decided to invest in higher risk options. Depending on your requirements, your 40s could be time to think about changing them to medium risk options, which will increase the safety of the fund. This is a fairly typical decision because few people want the risk of losing their fund when only a couple of decades away from retiring - and one decade away from being able to access 25% of it as tax-free cash.

You could also start thinking about diversification of your portfolio. A popular option is property, especially buy-to-let, but can also include commercial property or property companies. Some people also choose to have some money in a cash savings account, as the cash is readily available and protected for up to £85,000 by the Financial Services Compensation Scheme. The downside with this is if the rate of inflation is higher than the interest rate on the account, it's possible to end up with less value than you put in, and you pay your marginal tax rate on any savings earned. The Money Advice Service (MAS) also lists some alternative investments including collectibles, fine wines, antiques and art - although these should really only be considered by people with a strong knowledge of the areas, because the risk value is entirely dependent on the market conditions and the quality of the items. You certainly wouldn't be the first person to buy what they thought was a valuable antique, only to find out that it is worthless. The takeaway message on alternative investments is stick to what you know, and don't put all your eggs in one basket.

Diversification doesn't just refer to holding a mixture of investment types though. MAS explains that you can do it within one type of investment - "with shares, you can spread your investments between: the UK and overseas markets, different sectors (industrials, financials, oils etc), large and small companies."

Going from the above, your portfolio could include a combination of a company pension (or multiple ones), ISAs, SIPP, property and bonds.

Did you adjust your retirement plan in your 40s? Let us know on Twitter or Facebook.

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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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