What are my pension options?
People in the UK are living longer than ever before – one in three babies born in 2013 is expected to reach its 100th birthday. That being the case, it is important to plan ahead for your retirement. The basic State Pension is designed to provide only a minimum amount of income during retirement, so you should consider all your pension options as early as possible and take expert professional advice.
An occupational pension is a scheme set up and run for company employees, into which your employer might make contributions on your behalf. This could be the increasingly rare ‘defined benefit’ scheme (also known as a ‘final salary’ scheme)in which the amount you receive depends on the number of years’ service you gave to the company. However, it is more likely to be a ‘defined contribution’ scheme, in which you and/or your employer make a fixed level of contribution and the final value depends on how the underlying investments have performed.
Until recently, your employer could choose whether they offered a pension scheme. However, from October 2012, all employers became obliged to ‘auto-enrol’ employees into either a qualifying in-house scheme or into the new National Employment
Savings Trust (NEST). Both you and your employer will have to make a minimum contribution and the Government will also contribute via tax relief. For employees of smaller companies, auto-enrolment might represent their first opportunity to get involved in formal occupational pension planning. For larger companies, however, these minimums might already have been exceeded. It is therefore worth checking your employer’s pension provision and what it has done about auto-enrolment.
Personal pensions are schemes organised by the individual for their own benefit. You decide how much to contribute (subject to an annual contribution limit) and where the money is invested. The more you save, the more money you have to invest for your future – and the better your underlying investments perform, the higher that value will be. Stakeholder pensions are a simple, lowcost option designed to encourage lower earners to save for their future. Individual personal pensions offer more choice than stakeholder pensions and may offer additional benefits that will make them easier for you to manage. Self-invested personal pensions (SIPPs) are the most sophisticated personal pensions. They offer a huge amount of investment flexibility, but tend to be relatively expensive.
For more information, help and advice please contact Paul Hoskin at Hoskin Financial Planning.
THIS BLOG PROVIDES INFORMATION, IT IS NOT ADVICE. ANY OPINIONS ARE GIVEN IN GOOD FAITH AND MAY BE SUBJECT TO CHANGE WITHOUT NOTICE. OPINIONS AND INFORMATION INCLUDED WITHIN THIS EMAIL DO NOT CONSTITUTE ADVICE. (IF YOU REQUIRE PERSONAL ADVICE BASED ON YOUR CIRCUMSTANCES, PLEASE CONTACT US)