There’s no escaping the fact that saving into a pension is vitally important, and the sooner you set one up the more you’ll have to enjoy in retirement. Once you’ve made the decision that the time is right to start saving into a pension you’ll have a couple of important decisions to make; the first task is choosing the type of pension, followed by choosing the right provider.
Types of pension schemes
Workplace pension scheme
If your employer offers a workplace pension scheme this will be probably the easiest way for you to start saving for retirement. This route has become even easier with the introduction of auto enrolment. This means that by 2018 all employers must automatically enrol eligible employees into a workplace pension. Any money you save via a workplace pension will be topped up twice; first by your employer and second by the government with tax relief.
Many people, such as the self-employed, don’t have access to a workplace pension so will need to set up a personal pension. Unlike a workplace pension, where your employer selects the scheme, you will need to make a number of decisions about the scheme you select.
- What are the charges for setting up and running the scheme?
- Are their rules governing your contributions?
- Do you have a range of investment options concerning risk levels?
- Is it easy to transfer out should you want to move schemes?
Types of personal pension:
- Basic personal pensions – make regular monthly payments into the scheme and select your level of risk.
- Stakeholder pensions – a type of personal pension offering low and flexible minimum contributions; they usually feature capped charges and a default investment strategy.
- SIPPs (self-invested personal pensions) – a popular option for those making larger investments, they have a wide range of investment options but carry higher risks and often higher charges.
If you’ve opted to start a personal pension your pension provider will probably offer you a range of funds to invest in, each offering different levels of risk and likely growth. These options are likely to include; cash, bonds, share and property. If you don’t want to make a choice, there will probably be a default fund available, but check it meets your needs.
Do you need advice?
If you are joining a workplace scheme you should be able to start saving quite happily without the need for a financial adviser. However, if you are viewing your workplace savings as just one element of your retirement plan, a financial adviser could be very useful in considering your other savings options.
If you are not eligible to join a workplace scheme and want advice on your investment and risk levels. we would always recommend taking advice from a financial adviser. They will study your personal circumstances and plans for the future before recommending a pension scheme and contribution level.