For many, the time when they will be withdrawing a pension every week seems likes a distant glimmer in the seemingly endless journey of life. However, giving careful thought and consideration to your pension scheme is crucial nowadays, especially given the turbulent economic times.
It is Your Livelihood
There are no two ways about it; your pension is likely to be your only source of income once you have retired. This means that choosing one which will provide you with enough money for things like food, bills and leisure activities is essential.
The fact that an increasing number of people are having to rely on the state pension come retirement indicates that not enough of them are planning for the later years of their life. So, to make sure you have your desired level of income throughout retirement, choosing the right pension scheme is crucial.
One of the most important considerations you should make is how much return you are likely to get on your investment. For those who have a self-invested personal pension (SIPP) with company such as Bestinvest, this is especially crucial, as you will be deciding where your money is invested and thus what level of risk you wish to take.
Workplace pensions usually match your contributions fully, meaning they are one of the most effective investments you can make. Not only will you get all the money back that you have put in (perhaps minus a bit of tax), but you will also get all the money your employer(s) have paid into the scheme. This is why workplace pensions can be considered a truly unparalleled investment.
Those who choose a personal pension scheme (such as a SIPP) can often qualify for tax relief, meaning that they will take home more money once they have retired. This tax relief can be incredibly useful to those who earn higher incomes in particular, as they end up losing far less to tax.
Pension schemes with tax relief are also very useful to those who are self-employed, given that they do not have an employer matching their contributions.
Tax Free Lump Sum
When you retire, you are also entitled to take out a tax free lump sum of up to a quarter of your pot. If you have chosen a good pension scheme, then this could be a very significant amount of money, and could be used to fund anything of your choosing.
You could, for instance, buy a property abroad, invest in the car of your dreams, go travelling or even start a small business. The possibilities are endless, but choosing a pension scheme which will be the most profitable to you will ensure that the lump sum you can eventually withdraw is as high as it possibly can be.
As previously mentioned, your pension is your livelihood, so making sure that your pension scheme is truly excellent is extremely important in helping you to be happy after retirement. This does not only relate to the amount of money a pension pot will provide, but also how secure it is.
A good pension scheme should be as secure as possible, and not exceed risk levels which you do not want to take. After all, you will want to plan your retirement having a good idea of how much income you will be getting. So, choosing a good pension scheme also means choosing a secure pension scheme which will allow you to plan ahead.
Peace of Mind
Knowing that you will have a decent income, as well as a legacy to pass on to family and/or friends, should help you have better peace of mind during your working years. The security provided by a pension also helps you to support your family after retirement, and gives you a good idea of how life might look once your income from work has ceased.
The amount of money you get will ultimately depend on which scheme you choose and how much you are willing to pay in on a regular basis. Ensuring that you are well clued up on how your pension scheme works and how much you will need to pay into it over your working life can be very useful in helping you to achieve greater peace of mind.
Being prepared for retirement by picking the best pension available to you is incredibly important. Be sure to consider the risk factors of each different type of pension, and also be sure to research them fully before making that all important decision. Once you are set up with a good pension scheme, you’ll be able to rest easy knowing that you will be well catered for in your retired years.