What have you done with your pension money?

So, you’re wondering – what is ‘robo-advice’?  There is a growing market in the UK of online offerings where, instead of going for a consultation with a financial adviser, you use a questionnaire devised by the provider which, depending on your responses, advises you where best to put your cash.  Investors are placed in a broad investment strategy that, in theory, suits their objectives and attitude to risk. These strategies largely consist of passive investments which ‘track’ an index.

The move has come about in response to the retail distribution review which ruled on how advisers were paid and, in essence, meant they had to charge an up-front fee.  This led to many advisers devising a minimum sum they would accept for a consultation.  Clearly someone with a modest pot of money might feel that the charge was too great and therefore miss out on the opportunity to receive professional advice.

The defined benefit scheme – whereby the employer promises the employee a specified payment upon retirement, the amount of which is calculated based on several factors including the years the contributor has been in the scheme, their age, and their salary at retirement – is no longer viable in today’s world.

Recently, the high-profile collapse of the construction firm Carillion has served as yet another example of why this is the case.

The collapse means that, just like in the heavily reported case of retail giant BHS, thousands of employees are likely to have their carefully laid out retirement plans affected. Now that the company has gone into liquidation, it cannot afford to pay employees their expected pension amount, leading to yet another sizeable pensions black hole with a deficit of around £580 million (although the BBC reports that the final figure could be as high as £900 million).