What type of pension is the right
choice for me?
Years ago people carried on working until they literally
dropped, but now most of us would like to retire fairly
early and enjoy this phase of our lives. People are
living longer and retirement can last for 20 or 30 years.
The state provides a basic pension, but for many of
us this will not give the standard of living that we
would like to enjoy in our well earned retirement, and
therefore another source of income will be required.
Added to this the age at which we will receive the state
pension is going to rise and you will have to wait till
66, 67 or even 68 if you are currently in your 20’s.
The basic principle of pension planning is the same
- whether your employer offers a company pension scheme,
or you have to make your own arrangements: the
sooner that you start making contributions, the more
comfortable your retirement could be.
There are 3 main types of pension:
Two provided by your employer, whether
this is linked to your length of service and salary
through a defined benefit or final salary scheme, or
through a defined contribution or money purchase arrangement,
where the pension available will be dependent on the
fund built up to retirement. An employer will make contributions
to these schemes and therefore the advice in most cases
would be to join.
The third type of pension scheme is
also a money purchase arrangement through a personal
or stakeholder pension plan, usually provided by an
insurance company, where an individual can fund for
their retirement, with choices to match personal preferences.
In some cases an employer will offer a group personal
or stakeholder plan.
One type of pension scheme that has
received a good deal of attention in recent times is
a Self Invested Personal Pension scheme or SIPP.
A SIPP is a money purchase scheme, and though this used
to be regarded as an option only for the wealthy and
those with large funds, now that the costs on managing
a SIPP have fallen and it can provide a very flexible
plan through your working life and into retirement.
Whichever type of pension scheme is available or most
appropriate for your circumstances, pension planning
should be viewed as a long term investment.
At Harris and Associates Financial Consultants Limited
we can advise you on deciding the best way to save for
your retirement right through to advising on the most
appropriate way to invest your accumulated funds to
receive income in retirement.
The value of an investment is not guaranteed and
can go up and down depending on investment performance.
You could get back less than you have paid in.
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