Pensions

pensionsMany people dream of a comfortable old age, doing all the things they’ve put off due to work and kids – maybe a round the world cruise, or the campervan they’ve always talked about.  Unfortunately, for many it will remain a dream! If you’re relying on the Government to provide you with a comfortable old age, then you will be in for a shock!  For people retiring in the future, the maximum state pension will be £155 per week, and that’s if you have 35 years of National Insurance contributions!

So what can you do?  The answer is to save and start as early as possible.

Why should you save?

AS people live longer and in better health, income in retirement will have to last maybe 30 years or more, so having some savings to get you through is important.  Most people use a pension to save for retirement – whether it’s through their work, or a private arrangement.  Pensions are a good way to save for a number of reasons:

The government gives you money towards it in tax relief – that’s right; The Government GIVES you money when you put it in a pension.  For every 80p you save, the tax man will give you another 20p!  Over the course of a lifetime of saving, that can be significant part of your pension!

You can’t spend it until you get to retirement age!

You can decide how to take the money when you retire.

Why start early?

The sooner you start saving, the more time you’ll have for your fund to grow.  The laws of compound interest work very well over time. In addition, if you start later in life, you will need to pay in more money to get the same amount of pension.

Workplace Scheme?

If you have a pension scheme it work, it may well be worth joining.  Normally, your employer pays in money as well as your contributions – so more free money! The Government has introduced new workplace pensions, called Auto Enrolment.  Your employer should be talking to you about this (if they haven’t already).  The plan is that all companies will have a workplace scheme that automatically puts people in the pension scheme!

State Pension

As well free money, the Government may also give you a state pension!  From 1/4/2016, the maximum is now £155 per week, as long as you’ve paid in for 35 years and not been contracted out!(confusing isn’t it).  The reality is, that most people won’t get the full amount in the immediate future, and that the state pension is designed to provide a very basic standard of living!  The state retirement age is being increased from 65 to 67 and then 68, and as we live longer, it will no doubt be changed again!

What to do?

If you want to have the happy, comfortable retirement you always dreamed of, then you need to plan for it.  We are very happy to sit with our clients and explain in plain English what their options are, and help build a strategy for them  to get the happy old age they want, or to help them have a happy middle age by retiring early!

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Financial Services Authority