Pensions are one of the most tax-efficient ways to save for your future. With tax relief on your contributions and any investment returns free from Income Tax and Capital Gains Tax (CGT), your fund can be an effective way to save for later life.
Thanks to these benefits, you might think that everyone would pay close attention to their pension throughout their careers, keeping a close eye on its value to ensure that it is on track to provide the retirement they want.
Yet worryingly, according to figures from Standard Life published in Professional Adviser, around three-quarters of UK adults do not know how much they have in their pensions.
As a professional rugby player, you may well still have a fair few years ahead of you before you need to think about what you have in your pension. Or, you may be approaching an age where you need to think about hanging up your boots and exploring what comes next.
Either way, it could be a worthwhile exercise to stay on top of your pensions and any other form of retirement funds you are building, so that you can make the most sensible decisions with your wealth.
So, find out why it can be beneficial to know the value of your pension, whether you have just signed your first pro contract or you are preparing to retire.
Knowing how much you have could help keep you on track to meet your life goals
You might imagine that knowing what you have in your pension or other savings is an important exercise because it allows you to consider what kind of lifestyle you will be able to afford later down the line.
But actually, considering this the other way around can be more useful: it is the type of lifestyle you want that can determine how you manage your money.
In other words, by thinking about your goals for the future first, you can have a rough idea of how much it will cost to live your dream retirement. In turn, this can make it easier to make important decisions with your wealth, such as:
- Where to hold your money, such as in your pension or across other savings and investment accounts
- How much you need to save or invest during your career to afford the lifestyle you want in retirement
- Which assets you want to invest in and in what proportion.
Seeing as your pension is likely to be one of your most significant places where you hold your investments, knowing its value throughout your career can help you make more informed decisions like these.
As a result, it can be an important step in making sure that you remain on track to meet your life goals.
The sooner you start planning, the longer you will give your money in the markets
There is another side to the coin of keeping an eye on your pension and prioritising it from early on in your career. Historically, investment growth is often achieved over the long term, so having an eye on your wealth right from your very first professional training session also gives your money the longest window to grow in the markets.
Figures from Schroders make for particularly interesting reading on this subject, analysing market data between 1986 and January 2021.
The research looked at what would have happened to your returns if you had invested in three of the most significant stock indices in the UK:
- FTSE 100, made up of the 100 largest companies in the UK by market capitalisation
- FTSE 250, comprising the largest 250 companies
- FTSE All-Share, an aggregation of the first two indices, plus the FTSE SmallCap Index.
It discovered that had you invested £1,000 in 1986 and left it invested in the FTSE 100 all the way until 2021, you might have had £17,323. This increased to £19,452 if invested in the FTSE All-Share, and up to a remarkable £43,595 in the FTSE 250 over the same 35-year period.
While this data is historical and also only looks at UK company performance, it still presents an interesting example of just how powerful long-term investing can be.
So, by being active with your pension savings and other investments from early on in your career, you might be giving your money a greater chance of producing returns that could help you live your desired lifestyle later down the line.
Get in touch
If you would like help planning for your future from an experienced professional, please do get in touch with us at DBL Asset Management.
We are financial experts who specialise in working with professional rugby players.
Email firstname.lastname@example.org or call 01625 529 499 to speak to us today.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.