Some might ask “why bother with a pension at all?”

A fair question to ask, perhaps, following  the bad publicity ( including the Equitable Life affair) and the poor performance of some pension funds in recent years.

Many people, particularly younger people, think pensions are boring, or difficult to understand, and definitely for the older set. The answer to the question "why bother" might be, “if you think pensions aren’t worth bothering with, what alternative action are you following to provide for your old age?” To which the reply is usually “nothing”. 

Unfortunately doing nothing, and relying upon the state, is a certian path to being poor in retirement. The Government is already phasing-in an increase in State pension retirement age for women (from 60 to 65), and has  increased the age at which a person may take benefits from a personal pension from 50 to 55. These measures, and the fact that the Government continues to keep pensions in the news, is a clear indication that State Pension benefits are under threat. 

But all is not gloom, or at least it need not be.

Pensions are still by far the most efficient way to save for an income in retirement. The tax reliefs allowed are significant, and  the choice of investments is as wide as most people will ever need.

Frequently an employer will contribute as well.

A person who saves a reasonable sum into a pension each month throughout their working life is more likely to have a pension income in retirement that will be sufficient to maintain their standard of living.

How Much?

But how much is a “reasonable sum” for contributions?

There is no straight answer, but ideally you should save as much as your budget will allow, and for most people as their disposable income increases with age, the contribution to their pension should also increase. At the very least, you should maintaince the same percentage contribution throughout the years, as your salary increases. 

The sooner you begin saving for retirement, the easier it will be to accumulate the substantial fund that will be necessary to generate the retirement income you need.  Please remember the later you start - the more of your disposable income you will need to put away.

For more information, please contact us