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How you can build long-term wealth by rebalancing your pension pot once a year


The concept of wealth is an alluring and often misleading one, particularly when it comes to securing a bright financial future.

This was explored in further detail earlier this year, when it was revealed that a high proportion of households earning £70,000 per annum claimed that they were just about managing. The message here is clear, as wealth is always relative to the macroeconomic climate and concepts such as interest rates and inflation.

Why You Should Focus on Rebalancing Your Pension Funds

With inflation currently soaring at a disproportionate rate to real wage growth, there is no doubt that households must work harder than ever if they are to build and optimise their wealth. One way in which this can be achieved is by constantly reviewing and rebalancing your existing pension pot, as you look to take a proactive approach to managing your assets and boosting future returns.

This should be part of a three-pronged approach, which begins with the consolidation of your existing plans into a relevant SIPP from a provider like Bestinvest (who focus on reducing the cost of transferring funds). From here, you can look to access a broader range of asset classes and diversify your interests, which helps to minimise risk while also optimising potential returns over a sustained period of time.

The final step is something that even seasoned investors can overlook, despite the fact that rebalancing your pension pot regularly can boost returns significantly. According to studies, performing this task once each year while making annual contributions of £1,000 could boost returns by up to 8.6%, over a period of 20 years, so long as you are able to identify the best performing asset classes during this time. Your choice of SIPP provider is also important, as this will determine the precise range of assets that you are able to invest in as part of your pension plan.

The Bottom Line: Why Rebalancing is More Important than Ever

Ultimately, rebalancing your pension fund is more important than ever in the current economic climate, particularly as the impact of wealth continues to be undermined by rising levels of inflation.

By adopting this proactive approach to managing your funds, while also boosting contributions by sacrificing some of your salary, you can optimise the value of your retirement capital and ensure that it is fit for purpose when you eventually stop working.

This should also offer hope that despite the current economic climate, it is still possible to build sustainable wealth with the right strategy.