The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested. Tax treatment varies according to individual circumstances and is subject to change.
We know saving for your retirement is hard when it’s decades away and there are so many other demands on your income right now, but retirement planning makes sense. You get tax relief on pension contributions within limits and your employer may add to your pension pot. New rules mean you can access more of your pot at 55 (57 from 2028) and your family could benefit more from what’s left when you die.
If you don’t yet have an occupational pension, auto-enrolment is likely to change that soon; but it may not deliver the retirement income you need, especially if you’re over halfway through your working life. A personal pension could provide a boost and, if you’re a company director or business owner, a self-invested personal pension (SIPP) is a useful option that could benefit you and the business.
Wherever you work, expert retirement planning is key, during your career and when you retire. Do get advice on whether the flat rate State Pension (begins April 2016) plus your workplace scheme will cover your likely retirement needs. Whatever decisions you make whilst working, the new drawdown freedoms (these don’t apply to final salary schemes) mean that an annuity won’t be your only choice at retirement. We’ll explain all your retirement options.
It’s not easy working out how much you’ll need after retiring, maybe 20 or 40 years from now, but your State Pension won’t be enough. You’ve various options to boost your pension outlook, though you’ll need advice about these. Start retirement planning early and give your pension pot time to grow.
Linked to your job, this is sometimes called a workplace pension. Your firm may run its own or use an insurer’s group scheme. Auto-enrolment means all employers must soon offer pensions and pay in too. If you’ve left money in previous employers’ schemes, seek advice on what to do about this.
This is a useful plan you can set up with a provider and it’s not affected if you change jobs. As with other schemes, you get tax relief on contributions within limits and you can usually access your pension from age 55. The April 2015 rule changes give your plan added flexibility.
Often favoured by directors and business owners, the SIPP is a self-managed scheme that permits a wide range of investment options. It may be used for mutual benefit in connection with your company’s finances, investing in its premises for instance. A SIPP may also borrow on commercial terms, within limits.
Since April 2015, most pensions that aren’t final salary based can be accessed more flexibly. You’re no longer obliged to buy an annuity that provides a regular income for life. You may prefer drawdown and choose what to take out and when, though it’s crucial to make a well-informed decision.