Would you be happy to throw away your money?

Now of course we all know that if I asked this question directly the answer from everyone would be “NO”. And probably you would think that I was even mad to ask the question.  And yet, I often see this being done by my clients.

I am dealing with a client now who received a pension share from her ex-husband in 2010. And yet, 4 years later she had done nothing with it. And the only reason we’re dealing with it now because her solicitor asked me to contact her.

She had received 100% share of one specific pension pot belonging to her ex-husband. Since he no longer had any interest in this pension he will not be doing anything to monitor how well or otherwise it is performing. If he had retained some share he may well have been doing something with the pension. But as it stands he certainly wouldn’t.

The pension represents a sizeable value in terms of the other investments held by my clients. And yet somehow, because it was termed “pension” rather than “cash” she didn’t deal with it. And this isn’t that unusual. Although none of my other clients have delayed for this period of time I have been asked by several solicitors what the timescale is on implementing a pensions sharing order because they know one of their clients haven’t taken action.

If you were awarded a lump sum it would make sense to do something with it straight away rather than leave it sitting in your bank account earning a ridiculously low rate of interest. The same thing applies to a pension share. It may have the term “pension” but treat it the same way you would if it was a cash lump sum.

You cannot assume that leaving it where it has been invested is fine until you get around to doing something with it. Depending on your ex-husband’s financial situation this pension may have represented a reasonably small amount of his wealth. He may have decided to invest it in some high risk assets with view to getting a good return.

But of course the thing about investing to get a good return is that if the market moves against you, you are also at risk of having a big loss. If the pension represented a small amount of your ex-husband’s wealth this may not be a great issue. However, if the pension is possibly the largest (or only) pension investment you have then you would have a different attitude to how it is invested.

My advice:

Just because the money is in a pension fund rather than a cash lump sum, do not treat it any differently. By delaying taking advice and transferring this pension to your own pension fund with your own choice of investments you are at risk that the value of the pension drops in value, purely because it is an unsuitable investment for you. .

If you would like to discuss any of your financial concerns with me, please do call me on 01932 698150, and we can have an initial obligation chat.

 photo credit: Flickr/images-of-money