Who has never considered how they will live and more importantly to what standard once they retire?
Retirement is a situation many of us at a certain stage in our life consider and this poses a lot of questions, what will my level of income be once I retire ? and can I continue to maintain my current lifestyle or will I have to cut back on a lot of things?
The question about the future of retirement pensions is a taboo subject in the discourse of many political leaders, as it can lead to unpopular conclusions.
But what is clear is that maintaining the same lifestyle once our working life has come to an end is, at the very least, a sobering thought.
Therefore, it is worth looking for alternatives to complement future public retirement pensions that apply to us.
There are many possibilities but one of the most common are the Pension Plans.
What are pension plans?
A Pension Plan is an insurance, regulated and guaranteed by law, which is intended to provide an income when certain contingencies that the standard establishes are met.
These contingencies are as a general rule: retirement, work disability and death.
This is an important first point because it means that it is not money that we can dispose of whenever we want, but that certain situations established by law must be met.
These situations or contingencies have been easing over the years, adding others such as unemployment, serious illness or investment age, among others.
But before coming to the rescue of a Pension Plan, two questions have to be raised; If I’m interested in opening it and what kind of Plan to invest in.
Stakeholder Pension Plan
The Government introduced automatic enrollment in October 2012 so you may well already be paying into a pension scheme but is this enough?
When should I start investing in a Pension Plan?
It would be extremely beneficial to start investing with a view to retirement as soon as possible however, it’s not always economically possible to do so.
Also, we must bear in mind that the investment in a Pension Plan is not recoverable when we wish so considering other options is an alternative as well as a pension plan.
It is preferable, in these cases, to invest in other products that make it possible to recover the investment with more immediacy, such as investment funds, term deposits or insurance with a redemption determined over time.
What kind of contract plan?
Another aspect is the risk we want to assume in our Pension Plan. According to the investment risk we can clarify them in:
They are the least common, especially when interests are low. They guarantee a certain return during the time of the investment.
Invest mainly in public debt, usually from stable countries. They are very safe products, but in return they give very little profitability. They are best suited for people closest to retirement.
Most of your investment is made in the stock market, investment funds, associating your performance with certain companies, etc …, but always speaking of variable investment.
More risk is assumed, but potentially profitability is higher, so it’s down to personal choice.
Within this type there may be some that invest in raw materials, responsible investments, emerging countries, etc.
Combine higher and lower risk investments and are the most popular. Also, there are products that vary the risk from highest to lowest, as the years go by and the investor approaches the retirement age.
We hope this blog helps you think about making financial decisions for your future.