Pensions are critical in supporting you in your retirement. It is there to replace the income you no longer receive through your daily job. A pension is a good way of building a mountable retirement fund whilst working in a cost-effective savings plan.
Contrary to popular belief; the government may not be able to single-handedly support you throughout the longevity of your post-work life within the lifestyle you are currently enjoying.
As the average life expectancy continues to increase, it has become even more critical to plan how you are going to create enough funds to last you through this extended life period. You will need to consider the costs involved with the rise of inflation and assess the income you’re likely to need.
There are 3 main types of pension for your retirement:
Individual pensions
Company pensions
State Pensions
Individual Pensions
Individual pensions are flexible in that they are taken out by the individual with their own decision as to how much is paid into it every month. This type of pension will suit people who prefer to only pay their pension in smaller sums. They are popular for the self-employed, however can be easily taken and re-set-up when changing jobs for employees.
Company Pensions
Some employers will offer a company pension where that they match your contributions or may pay a percentage of what you pay. This type of pension is an excellent way of increasing the amount accrued in you pot. If your company offers this type of contribution scheme you should seriously consider the benefits that can be gained by joining.
State Pensions
State pensions are usually based around how many ’qualifying years’ a person has amassed throughout their working career. The earlier the pension is started, the more benefits are received upon retirement from the state. It could be beneficial to set up a pension sooner rather than later as in the future the government may be unable to fund a state pension like they do at the moment.
Many people dismiss the fact that they need to provide their own income upon retirement towards their pension, believe that they can retire at whatever age they like and are blissfully unaware of the true cost of things upon retirement.
All Pensions Are Not the Same
Many people view all pensions as the same. A pension plan is merely the vehicle that surrounds the investment. It’s what’s under the bonnet that matters. It’s pointless having a Porsche car with a mowing machine engine. Pensions can hold many types of investments within them, ranging from Cash Deposits, Government Gilts, Fixed Interest holdings, Corporate Bond funds, Unit Trust, Stocks and Shares, Property Investment and many more. You can even hold your own Commercial Property within a Self Invested Personal Pension (SIPP). The range is so vast that financial advice is needed to help choose the right plan for you.
A Pension Plan May Not be the Only Plan You Need
A retirement fund can come from a combination of options; personal pension, company pension, state pension, property investments and all other savings and investments that you may have accumulated over the years.
In order to be comfortable in the knowledge of a happy retirement all savings, investment opportunities need to be taken into account. That’s where we come in at Haworths, we can advise and recommend the best solution based on your individual circumstances.
After all, upon retirement, you need to be able to fund yourself for potentially the next thirty years or so… a long period of time to sustain a level of living that you are used to.
Whatever stage of your life you are at it is important you seek independent financial advice to help with these decisions.
Some aspects of employer pension schemes are regulated by the Pensions Regulator.
