Retirement Planning

The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.

Retirement should be like the longest holiday of your life and proper planning can make sure that you enjoy it to the maximum!

There are various Pension schemes available and the pension market has seen many changes over the years with more changes to come!

The new Pension Freedoms have made this an even more complicated issue.

Getting the right advice as early as possible can make all the difference.

Occupational schemes

Luckily many Companies offer a Company pension scheme. These can be very different from Employer to Employer! They can either be a ‘defined benefit’ (usually referred to as ‘final salary’) schemes or a ‘defined contribution’ (usually referred to as ‘Money Purchase’) schemes.

Final Salary schemes are not as common as they once were. The cost to the Employer over the last few years has lead many to change the scheme offered to staff or stop any new employees from joining the scheme. The employee gets a percentage of their final salary by way of a pension for life at retirement. This pension is dependant on the final salary and the time in the scheme.

Money purchase schemes depend on the contributions into the plan. The final pension is dependant on the amount invested and the time in the plan merely helps with potential investment growth. At retirement the employee gets a pension for life.

Both schemes allow for up to 25% to be taken as a tax free cash amount should this be of interest to the employee. Obviously this would have an impact on the amount of pension that the employee would then receive,.

Personal pensions

This is a pension that you can build up if your employer does not offer a Company Scheme or if you want the flexibility and control not offered by your Employer or if you are Self Employed. It is the same as the ‘Defined contribution’ scheme highlighted above.

Stakeholder pensions

The Government introduced a low cost option to Pensions in 2001. The Stakeholder Pension is a ‘Defined Contribution’ (money purchase) with restricted charges and offers great flexibility. Because of the restriced charging Fund choices tend to be more limited that for Personal Pensions

Pension plans are one way of saving for your retirement, however, there are many more options available. The main thing is to plan early and review your plans on a regular basis.