Looking at pensions

Most of us want to look forward to retirement. After 40 or more years at work, having our time as our own means a chance to relax, enjoying some new pastimes and perhaps a little travel.

It certainly should not be a time to worry about money.

That’s why getting the right pension and the income you need to make the most of your golden years is so important. Getting your pension right is easier if you are armed with a knowledge of the basics.

The state pension

Almost everyone is entitled to a state pension when they reach state retirement age. For the current tax year 2018/19 the state pension is £164.35 and will increase to £168.60 in tax year 2019/20., which is not enough for most people to live on comfortably. You may not even get that much if you have not made a full National Insurance contribution for the full 35 years required.

Most of us will supplement the State Pension with an employer’s pension, and we can have a private or personal pension as well.

Apart from the state pension, which is funded by National Insurance contributions, we need to save to build up a pension pot. But they are more rewarding than most other types of saving because they are tax efficient. The government wants us all to save for our old age, so it provides tax relief on the contributions you make.

Your contributions, boosted by the government’s generosity are invested for you and can build up into a substantial sum, your ‘pension pot’. You can then use this pension pot to provide the income you need when you finish work.

An employer’s pension

Employers must provide a pension for their staff. They can be a good option, as most employers will contribute to your pension fund, although you will need to as well. Old style employer pensions where you would get a guaranteed income based on your final salary are now rare. More common now are ‘Defined Contribution’, much you get will depend on how much you have paid in over the years.

What about private pensions?

A state pension and an employer’s pension can be a good basis for your retirement income, but if you want to take control of your future and stand the best chance of a comfortable retirement you can also save in an individual or private pension. This is essential if you are self-employed or tend to change employers regularly. There are three main types:

Stakeholder Pension Plans are a relatively low-cost solution. You can stop, start and change contributions as you need to. You are also able to choose from an option of funds to invest your money.

Personal Pension Plans tend to have a minimum contribution of typically £80-£100 per month They may have higher charges however many providers will discount their charges and these can currently offer a competitively priced option, They can also potentially offer a wider choice of funds run by the fund managers.

Self-invested Personal Pensions or ‘ SIPPs’ let you choose your own investments. You should probably only consider a SIPP if you understand investing and have the help of an expert financial adviser. As well as funds you can make direct investments.

What should you do?

Your pension is crucial to your future, and you should certainly get financial advice.

Everyone’s needs are different and getting the pension arrangements that are appropriate for you can be easier if you understand all the possibilities.

You can download our guide to retirement but there is no substitute for individual help from an expert. A call to Continuum could be the easiest way to get the help you need.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

The value of your pensions and investments, and the income they produce, can fall as well as rise and you may get back less than you invested.