QUESTION: I have a number of different pension schemes accumulated over my working life. What should I be doing with them?
ANSWER: It has been hard to avoid the media coverage of late that suggests collectively we are not saving enough for our retirement. But how much do we need?
The obvious answer is that it depends on our individual circumstances, but whatever those may be the essential first step is to evaluate how much you have accumulated to date.
According to national statistics the average length of time people spend in one job is 48 months.
So during a working lifetime the average worker will have numerous company and private pensions. Many will have been forgotten about during a working lifetime, like an old painting stored in the attic.
On leaving a company, many people just have their company pension frozen. This is common practice, and a new company pension is started with the next employer.
The contributions that you and your employer made to your fund now make up the fund's total investment and it will continue to grow in line with the general fund.
You should still receive an annual illustration of benefits and projections of income from your trustees or fund provider, but through moving house and so on many people lose touch with their old pension schemes.
Left with a series of frozen pension plans, most of us will trust to luck that the investment growth will be enough to achieve our retirement objectives.
It is widely accepted that the combination of asset classes in an investment portfolio is the single most important factor in determining investment performance.
In other words, the proportions in which you are invested in the likes of equities, property, fixed interest securities and cash will determine both the performance and, more importantly, the risk of your pension investments.
Traditionally most pensions have defaulted to an investment in either with-profits or managed funds.
With-profit funds have often formed part of client portfolios and, without exception, warrant further investigation.
The asset allocation of these funds and their future performance prospects will vary widely from company to company.
For example, some of these funds are wholly invested in fixed interest securities with little growth prospects, whilst others have maintained a more balanced weighting between all the asset classes.
Added to this the provider's financial strength and future bonus philosophy compound the uncertainty of this investment style, which can at best be described as medium risk.
The other classic investment choice has been that of the managed fund.
The theory behind these funds is that the provider will use their investment expertise to determine the split between the asset classes, thus controlling the risk and return characteristics independently of your circumstances.
Unfortunately the term 'managed' is something of a misnomer as regards the asset allocation. It does not significantly change from one year to the next and as a matter of course contains only 1-2% property assets within the overall portfolio.
Whilst both of these options represent a form of asset allocation, neither can hope to meet every client's recommended risk profile, and they certainly will not adapt to changing risk profiles over time.
In these circumstances it is worth investigating a pension transfer.
This will allow you to move your investment into a fund where you can control the asset allocation strategy in line with your own return expectations and attitude to risk.
In many cases you can transfer your pension in order to take advantage of better annual management rates, or better benefits than your current scheme offers.
This means that the money you have invested will be working harder for you when it comes to your retirement.
Every pension transfer within the United Kingdom falls under FSA regulation, and therefore you should only transfer your pension after you have taken independent specialist advice.
Raymond Mulligan is managing director of Johnston Campbell, a company of independent financial advisers regulated by the Financial Services Authority.