Can online tools help me achieve pension goals?
Q: I am a member of a defined contribution (DC) occupational pension scheme and we have just recently been given access to an online facility that allows members to track pension fund details and performance. It also gives us the option of using a retirement projection tool.
I am wondering what are the benefits to this type of tool -- is it not the same as getting my member benefit statement every year?
A: Online interactive systems, which often include some type of projection tool such as the one available to you, while relatively new to the market, are increasingly popular with employer-based DC schemes.
These online platforms are an efficient and cost-effective method of allowing pension members control over their pension fund to varying degrees. It also encourages individuals to increase their knowledge of pensions.
The aim of pension projection tools is to ensure that you understand whether you will be able to afford to retire comfortably, what income you can realistically expect in retirement and to explain the nature and size of the investment risks involved. These tools can help you understand what pension goals you should have and what decisions you need to make to reach those goals.
You can then judge the impact of each decision and determine if you need to alter your pension target, your contribution rates, your risk profile or your retirement date.
You can also see what level of contributions you need to make to increase the likelihood of meeting your retirement goal. This will help you achieve a better understanding of how much you need to save to fund your retirement. As you are probably aware, pensions are critical to your long-term financial security, so do research and seek professional expertise if required.
Fionan O'Sullivan, director, IFG Corporate Pensions