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Why bother setting up a pension?
There are a number of reasons why setting up a pension can be worthwhile if you want to secure a healthy future for you and your family. You will still need food and shelter as an absolute minimum but you will probably also want a good lifestyle. One of the best ways to ensure a healthy lifestyle after retirement is to start saving when you are young!
£14billion
As much as £14bn is invested into personal pensions every year but research shows that over 45% of people over thirty still have no pension and this rises to as much as 65% for those in their twenties. You can start saving at any age and there are even plans on offer where you can start saving on behalf of your child so that they will have some money put aside for their future plans and even for when they reach retirement.
Save Money
By beginning to save money from an early age, even if it is just small amounts, you can eventually end up with a substantial amount to live on once you reach retirement. If you fail to save early on you may find yourself having to continue working past retirement age just so that you have some form of funds to live on. The key is to be sensible with the amount you save each month and effectively monitor your budget of income to improve your overall lifestyle after retirement.
Pension Funds
Pension funds that are set up from an early age will have the huge advantage of benefiting from stock market growth. By paying just as little as £20 you could have as much as £120,000 by the time you reach 60. The good thing about saving when you are younger is that you may not have as much responsibility than if say you were in your thirties and had a mortgage to pay for and children to look after. So at a younger age you are more likely to have that bit of extra money to put into your pension pot.
Flexibility
Flexibility is another great advantage to pensions; here are just a few examples of setting up a pension fund. Firstly, there are a number of different ways you can pay into it. You can decide to pay in one lump sum or by making regular contributions; there are also no restrictions if you decide to stop making regular payments into the fund for any reason. This plan is also free from income tax, which helps it to grow the funds much faster and you can set up your contributions to suit your inheritance tax planning. These are just a few examples of the benefits of setting up a pension fund.
Advantages
The main advantages, therefore, are that you can decide how much you pay and how you pay it. You do not have to pay tax and you are guaranteed a salary after you retire.
In some circumstances, however, particularly with women who may be more likely than men to take a career break, pensions can pose some disadvantages. So it may be better to look at alternatives such as ISA’s (Individual Saving Accounts) or even investment into a second property.
Risk
Of course, there is some level of risk involved when setting up a pension as with any form of investment. By seeking an IFA (Independent Financial Advisor) you are able to get valuable advice about the best schemes to suit your requirements and the best way to go about setting one up.
By doing nothing you are setting yourself up for possibly another 40 years before you retire, but by making an effort to save from a young age you are giving yourself a chance to determine when you retire, giving you greater choice and flexibility when the time arrives for you to retire.
Tax Free
Pensions represent an effective tax free savings opportunity as there is no other place that the government contributes cash to your own individual savings pot. It is very tax efficient with the possibility of an additional contribution from your employer, making it an ideal way of saving if you want to see a lot of extra cash at the end of it.
Whether or not you are fond of the idea of a pension, there will eventually come a time when you can no longer work, so a little extra cash saved is a great way to guarantee that future income today.
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