With UK pension schemes receiving bad press and under performing, many are opting out of pension schemes altogether. They remain however, a necessary and fundamental investment.
With the state pension yielding just over £10,000 per annum, it is becoming unthinkable not to have another means of income for retirement.
There are several ways to back-up the pension scheme and in doing so, it is possible to have a little more financial security.
Start Saving Now
The sooner a pension is paid into the better. It is much better to start one at twenty than it is at forty, as thanks to compound interest the twenty quid a month invested when you were twenty is worth a lot more than twenty quid at retirement age.
How Much Should I Contribute?
The simple answer is as much as you can afford. However, it is worth considering other forms of savings as well for retirement, such as stocks and shares ISAs. Many financial advisors do not believe in having all the money tied up in one place. So if you can pay £100 per month, perhaps split it between a pension scheme and other investment vehicles such as the stocks and shares ISA.
Work Related Pension Schemes
Work related pension schemes are moving away from final salary pension schemes which guaranteed your pension based on your years of service. The alternative is money – purchase plans or defined – contribution schemes. Your employer will contribute a certain percentage to your pension, which typically is fairly low. Some companies however, will offer between 5-15%. Nonetheless, it is free money and should only be turned down if you have a much better alternative somewhere else.
Work past Retirement Age
Though it is not a suggestion that currently sits well with unions, if you feel your pension pot is not going to be enough, you can always choose to work longer. This does not have to be a full time position, as lets face it by this stage you will be getting on a bit and probably want to enjoy life a little more. Whether you want to continue in your present role or switch to another is irrelevant as far as the pension pot is concerned as the pressure to live off it has diminished.
Taking Control
Whether you have an occupational pension scheme or a private pension scheme you still have a measure of control allowing you to contribute more if you choose to.
The Self – Invested Personal Pension scheme (SIPP) is a popular choice for people that either cannot join a workplace scheme or wish to run both a private pension scheme and an occupational scheme at the same time.
The pension scheme despite its bad press is still a necessary financial investment. If you are considering a pension scheme, then it pays to shop around.
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