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Pensions
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Hot
Topics!
Pensions Simplification is
Here! The legislation went live on April 6th, 2006. Get to grips
with the main changes and see if you need a review! |
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Introduction: Retirement
Planning
Your income in retirement will probably come from
one or a combination of the following:
Some might ask “why bother
with a pension at all?” A fair question to pose, perhaps, following all
the recent 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”.
Doing nothing, and relying upon the
state, is to court poverty. The Government is already phasing-in an
increase in State pension retirement age for women (from 60 to 65), is
gradually raising the State pension age to 68, and has raised the age at which a
person may take benefits from a personal pension from 50 to 55 (effective
from April 2010). Perhaps
further measures restricting or reducing benefits will follow in coming
years as the State tries to shore up a creaking system.
But all is
not gloom. Pensions are still by far the most efficient way to save for an
income in retirement. The tax reliefs allowed are significant, the choice
of investments is as wide as most people will ever need, and 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 for a young
person starting out, putting away a percentage of
income half one’s age is a good rule of thumb: for example, 10% at age 20, 15% at 30, up
to 20% at 40. Ideally one
should save as much as one’s budget will allow, and for most people
their disposable income increases with age.
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. Those who procrastinate will probably find their eventual fund to be much
smaller than the early starter.
Summary:
Retirement
planning is a decision that everyone should take responsibility for.
Ask yourself
at what age would you like to retire, what your financial responsibilities
are likely to be and on what percentage of your current salary will you
want to retire?
We can Help
Bates
can help you answer these questions, work out if there is a shortfall in
your requirements, the income you are likely to receive, and what you
should consider in order to achieve your retirement plans. Just pick up
the phone to discuss - 08700 427 900.
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