Life After Work
Retirement is miles away!
Retirement plans and pensions are not a sexy subject for anyone to consider! But time does not stand still and spending time considering how you spread your money throughout your life is not just very important, but vital. We have all heard the motto ‘Live for today’ but not considering the future and making a considered plan is potentially going to mean a very frugal existence in your later years of your life.
Here are a few stats to mull over –
The Pension Gap is a major issue for many women, who have a fraction of what their male counterparts have in their pension pot. This is usually because they have taken time out to raise a family or had a lower paid jobs or have been divorced.?Saving money into a pension is vital if you want to live a comfortable life in retirement.?Given a third of all women in the UK have no personal pension in place?(FT, 2019),?here we are sharing some vital information on pensions and explain the basics.
What is a pension?
In simple terms, a pension is a pot of money you invest into throughout your working life. When you retire, it provides the income you no longer enjoy through working. Your employer, where applicable, may also contribute to your pension pot. It’s worth noting that your personal pension pot does not include the state pension paid by the government, therefore, the more money you save now, the more money you will have to spend in the future. If, like most people, you work for more than one employer during your career, you will almost certainly have multiple funds. All of these funds will be contributing to your retirement income, but we will talk about how to review your total pension pot below.
Why invest in a pension?
The first thing to remember if you don’t currently invest in a pension is, you are never too young to start. Pensions are not something to put off until you have kids, a mortgage and plenty of other bills. The earlier you start, the more you will save for a prosperous future. You could start a pension for your child now!
Many people give little thought to their later years. So consider the answers to the following questions?
And remember, we are living longer than ever before.
Your house in not a pension!
Once you stop working for an employer or running your own business, you still need an income unless you have saved a very large sum of money. Your house is not a pension – as you need somewhere to live!?That is why pensions are so important.?By contributing each month your money grows by being invested in funds designed to deliver returns that match your attitude to risk. You also enjoy the added benefit of tax relief on your contributions. This means some of the money you would have given the treasury is invested in your pension instead. Your pension provider or financial adviser will update you at least annually on how your fund is performing and what your retirement income is likely to be.
Pensions and?Tax relief
If you are self-employed you are entitled to all the same tax reliefs on pension contribution as employed people.
When you add into your pension you get a tax top at the rate or 20%, 40% or 45%. For example, when you pay in ￡800 if you are a basic rate taxpayer this will turn into ￡1000.
Workplace pensions -Your employer must not enrol you into a pension scheme and make contributions if you earn a certain threshold. They do not have to contribute if you earn these amounts or less, ￡520 a month, ￡120 a week or ￡480 over 4 weeks You can then decide if you want to contribute and how much.
Some employers will offer you a Group Personal Pension scheme. This scheme will be managed by a pension provider chosen by your employer, offering lower costs because of the number of people they cover. However, the pension will be a direct arrangement between you and the pension provider. Typically, your employer will normally pay a monthly contribution into your pension. Indeed, some people consider how much an employer contributes to their pension as a key factor in deciding whether to work for a company. There are various schemes with different benefits. It’s worth taking the time to understand what scheme you are part of and the benefits this scheme will deliver.
If you are knowledgeable about investments, talk to a financial adviser, you may choose to invest into a self-invested personal pension?(SIPP).?It is very similar to the standard personal pension but gives you extra flexibility in where your pension fund is invested.
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Always get advice before deciding what action to take.
Why you need to review your pension?
Once you have been paying into your pension for some time, it is important to review how it is performing on a regular basis. This way you can ensure you are on track for your retirement plans.
It is easy to set up your pension scheme and then forget about it. The fact is, you may change your appetite for risk as you get older, have more or less money to invest, or your funds may not be performing as well as others in the market. That is why it is essential that you review your pension pot at least annually.
This is even more important if you have several pension funds. Make note of all your pension schemes so you know your total pot. This also provides an opportunity to review integrating your pensions into one fund for convenience, ease of tracking, and increased performance. It is important to note that you should check the terms and conditions of the various schemes to ensure you do not lose out on any benefits from different providers.
It is well worth getting an independent financial adviser to help you review your pensions and make the right investment decisions. Advisers from the pension companies cannot give you advice themselves, they can only answer your factual questions.?Do contact us?if you need help and arrange a discussion about your pension.
5 Questions to ask when reviewing your pension?
Have you got lost pensions?
There are 2billion pounds worth of unclaimed pensions sitting with the government. If you have had lots of jobs over the years and cannot remember which schemes you contributed to then you can find out by visiting this link.
6 Simple Steps to Pension Success
Hopefully, you can now see that investing in a pension is essential to leading a happy and prosperous retirement. It may seem like years away. But time passes very quickly. So please – if you don’t have a pension, start one now.
And if you do, make sure it is working for you and is on track to reach your goals.
We can help with any aspect of retirement planning –message me here.
I have 27 years of experience in the financial planning and advisory sector. Recognising a need to support women to become more engaged with their financial management, I founded ‘She Can Prosper’.?
Through this I share my knowledge and insights with women who are approaching 40 and beyond to help them improve their financial wellbeing and empower them to take the right steps to plan for their future.