In increasingly tougher financial times, planning for retirement has never been more important. However you’re saving for the future, having the best pension plan available is a vital factor in ensuring you make the most out of your retirement fund. Almost everybody will reach a point in their life when they either can’t or don’t want to work anymore. The most efficient and secure way to ensure your standard of living does not drop when that times comes, is to have an effective pension. Around 70% of all men and women in the UK now reach the age of 75 and a state pension is less than £6000 a year. For almost anyone who is used to earning a standard salary that will constitute a huge drop in earnings; and in a time where increasing numbers of people don’t own their own property, could cause huge problems later in life.
Pensions enjoy generous tax breaks. Every £80 you pay in gets rounded up to £100 and if you are a higher rate taxpayer you can claim a further £20 on top. Your money grows largely tax free and when you do get to retirement you can take a quarter of it back as a tax free lump sum. Another benefit of a pension when compared to something like an ISA, is that if you die before retirement the fund will be paid out to your next of kin as a tax free lump son. With other savings it will fall into your estate for inheritance tax purposes and thus a large proportion of it will go to the state. A pension offers other significant benefits over a standard savings account. Shortly the law will change so ALL employers have to contribute to your pension. So if you’re paying £80 in now, that will double to £160 without you putting anything else in yourself. Interest rates are at an all-time now and currently large savings are sat in banks gathering almost no momentum. A high risk pension however, can take advantage of a number of global markets to ensure you’re getting the best out of your retirement fund.
Ultimately the most important reason to have a pension is to ensure that you and your family are provided for in retirement. Countless people head into their 30’s and even 40’s without adequate financial planning and that can be costly when it comes to retirement. People are living longer but the flipside of that is people have to work for longer. Why work for 5 or 10 years more than you have to when saving from an early ages means you can enjoy your older years and spend time doing what you want to do. A pension has never been more important and choosing the right one for you is a decision that will affect you and your family for a generation.