The age of retirement is rising in the UK, with many of us in our 30’s expecting to work until our early 70’s. This might seem like a long way off but investing today in options for your retirement is a good move; it’s never too soon to start thinking about the future and with a little planning, you can look forward to a (hopefully) happy retirement!
Consider a Self-Invested Personal Pension
Those on lower incomes could consider investing in a Self-Invested Personal Pension (Sipp). These pension schemes are a great option for anyone who currently has money tied up in several different pension schemes; for example, if you have worked for several different employers. Combining these pensions can reduce fees and improve your investment performance.
I have a Defined Contribution Scheme – is a Sipp Right for me?
Defined contribution schemes are excellent candidates for transferring into a Sipp. The payment you get from these schemes can be disappointing, as it is linked to investment performance. If you’re a member of your current employer’s defined contribution scheme, it’s normally not worth switching, as you lose out on any contribution your employer is paying towards your scheme. Ask your employer if they will consider making contributory payment into a Sipp instead before making your decision.
Lite or Tax-Relief Sipps
Most people investing in a Sipp choose the Lite or Tax-relief options. The typical sum invested in an average Lite Sipp is around £50,000 and you don’t need to use an Independent Financial Adviser to invest in one. These Sipps offer a wide range of investment choices. Or you could consider a tax-relief Sipp, where you can qualify for 40% tax relief on any money that you invest in your Sipp. You can invest up to £50,000 a year (unlike a stocks and shares ISA, where only £11,280 can be invested per annum) and may be able to carry unused allowance from previous years forward.
Reviewing your Pension
With almost half of the UK’s population having never carried out pension reviews and forty percent of us having never changed our pension and investments, we could be missing out on better options for our retirement. Most of us go for the default options that are offered to us by our pension providers, and would rather chat to friends and family for advice on our pensions and investments than financial advisers and accountants. You shouldn’t wait until there is a change in the current market to carry out a pension review; regularly reviewing your pension can help you ensure that your investments are performing as you expected and determine whether you are on track to achieve your goal of a financially secure retirement.
Why should I Review my Pension
Reviewing your pension can help to protect investments from the fluctuating market. You will be able to see if the market is about to crash or take a downturn, and take preventative steps to protect your money. As you approach retirement, consider reviewing your pension to lower the level of risk and make sure that it’s still appropriate. A pension review can help you to make your pension work harder for you alongside any changes to current legislation and you can check your contribution levels to make sure you’re paying in as much as you can, to budget for a secure and happy retirement.
Where to Seek Pension Review Advice
Always see a qualified financial adviser for any advice relating to your pension and investments for retirement. Often, your bank or building society will have financial advisers available who you can make an appointment with, or seek recommendations from friends or family. Remember you will need to consider not only your contributions and the performance of your pension but also the risk factor and any options for changing to a more suitable scheme.
About the Author: Kay Brown is a freelance writer who specialises in pensions and investments. She recommends that if you have regular pension reviews, then you will feel financially secure as you will know if you have enough to live on comfortably later in life.