When you’re young you don’t really think about pensions, that part of your life seems such a long way away and saving for your retirement could well have an impact on your current disposable income which you may wish to spend on other more current activities.
For most of us when starting out on our career paths we look at saving for the future and the future normally means a place to live, saving for a deposit on a house or flat and generally investing in this. If you are lucky enough to get onto the property ladder early enough this could well be an investment that would be very beneficial when you decide to retire as you can always downsize leaving you with a surplus to live off.
Although, a lot of parents our now helping their children get onto the property ladder opting for equity release or taking out an additional mortgage. This does help kickstart the process however, you still need to think about the future and starting saving early for your retirement or saving in general has it’s benefits.
Especially a pension as there is tax relief on pension contributions, for both basic and higher rate tax payers.
Workplace Pension Schemes
In the UK all employers must provide a Work Place Pension Scheme for their employees. This is referred to as Automatic Enrolment. There is certain criteria that needs to be met in order to enrol. These being and not discounting you are aged between 22 and the state pensionable age, you are earning at least £10,00.00 per year and you are employed by the company.
Your employer has a legal obligation to pay a minimum of 3% of your salary into your work place pension scheme with you paying a minimum of 5%. Both parties can pay more but the minimum contribution combined must equate to 8%.
Private pension plans are very popular and if you’re employed your company can pay into this instead of a workplace pension scheme provided by the company.
If you’re self employed you should seriously consider this as statistics show that pension savings for this particular sector is very low and you don’t have an employer to assist with the payments. Providing for your future, deciding on how much you can financially commit to without impacting on your other monthly outgoings can be a juggling act and some months you may be able to save more than others. However, it’s important to start this process early especially if you would like to maintain your current standard of living when you retire.
Getting the right advice on pensions, who to invest with and how much is always a challenge but there is plenty of advice out there and a lot of it is free. The Government have a webpage on The Pensions Advisory Service which contains a lot of useful information, it’s never too late to take a look and start improving your retirement prospects!