Retirement Pensions

Published:  29 Oct at 7 PM
The amount you deposit into your pension plan whether it be extra-curricular donations or company contributions will determine the amount you will have to live off when you retire. The way you choose to invest it, the age that you first start withdrawing your pension and the amount an insurance company would be prepared to offer you as a monthly salary for the remainder of your life in exchanged for the saved amount all define how much your income would be.
Some people may be of the opinion that they don’t need to waste their hard-earned savings on putting it to one side for later life when they will be given a pension by the government anyway. But with the government funded pension being around £100 a week without means testing, if you leave it until you reach retirement you will be looking at quite a struggle to get by, especially if you are still paying a mortgage or any other loans.
It is also important to remember that should you wish to put money aside in a pension plan, their are big tax advantages to doing so not to mention the benefits of compound interest. For example, if you had just turned 65 and had been putting £50 a month away since you were just 20, saving it up in cash you’d have about £27,000 in savings. However, had you decided to put your £50 a month into a pension which would average a return of around 7% (based on the fact that the stock markets have grown around 8% per annum for the previous eighty years), you would now have £190,000 in savings. Obviously this wouldn’t include all the fees you would be required to pay over the course of the investment but you can see the potential benefit of compound interest.
As with any purchase that will directly affect your future, it is important to get advice on which is right for your needs and circumstances. In addition to making the right choice of pension product, you also then need to ensure you choose the right pension provider so it can be somewhat of a minefield. It’s difficult finding your way round this minefield but with the right guidance you can accurately select the right one and this often comes in the form of an Independent Financial Adviser. They can often provide you with advice on which is the best option and in many cases come up with a tailor made plan.

Legally, you can have as many or as little personal pensions as you wish assuming that with all your contributions, you do not go over the limits set by the government to benefit from the tax breaks. For example, you are not able to benefit from these tax breaks on over 17.5% of your income for those under the age of 35. There are obviously further limits and again if you are contemplating setting up multiple pension plans its important to speak with an Independent Financial Adviser about what your restrictions are.

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