The best pension plan is the plan that you start early, as the earlier you start planning for your retirement the better. There are 3 types of pension plans that you potentially pay towards during your working life.
State Pension:
you pay National Insurance Contributions (NIC), which the government collects, and it is partially used to pay people who are retired. The government does not invest the NICs, however, it is Pay As you Go scheme. If you pay NICs for at least 30 years, you will get your full state pension, which is currently £221.20 (tax year 24-25). You will need to ensure that you have paid enough NICs to qualify for the full state pension. You just need to visit the government website to check your NICs and what you would expect to get when you reach your state pension age.The Pension Hub Service
The free service from The Pension Hub connects you with FCA Regulated Pension Advisor and you qualify for a FREE pension advice consultation.
Private Pension:
which is a plan that you start yourself, you choose the provider, the investment risk, and the level of contributions. This private pension plan could be a standard Personal Pension Plan (PPP) or a SIPP (Self-Invested Personal Pension), where you can invest in commercial properties, single shares and so many more. More than likely you will need to seek a financial advice to guide you through this process and to review your plan on a regular basis to ensure it is on track.Workplace Pension:
If you work for an employer, then it is more than likely that you are a member of your employer’s pension scheme. You make contributions from your salary into the pension scheme and your employer does the same. Normally, you do not choose the risk level or the pension provider. Joining your employer’s pension scheme is important, as you will receive your employer’s pension contributions as well as yours and normally the policy fees and charges are low.The main two things that affect the pension pot in a private pension or a workplace pension are fees associated with your pension plan and the investment performance during the life of the pension plan. If the fees and charges are high, they will eat into the growth of your pension plan. If the pension plan does not grow over the years, then you will not be able to build a pension pot that can be used when you retire to generate enough pension income. Therefore, investment performance is vitally important. Your pension plan could be a good one to start with, however, without regular reviews from your financial adviser, your pension plan could lag in terms of performance.
The best pension plan is the one that is on track to provide you with the retirement income that you seek. As a rule of thumb, you should be aiming at a retirement income of two thirds of your salary. Others would suggest between 50-70% of your salary before retirement, so if your salary before retirement was £60K, then you would aim to have a pension income of between £30K and £42K per annum. To achieve that, you will need to start your retirement planning as soon as possible. It is NEVER too early to start your retirement planning. The earlier you start your pension plans the less initial contributions you will need to pay into it and vice versa.
There are so many theories regarding how much money you will need at retirement, however, I think it all depends on what type of retirement you are looking to have and how much income you will need to achieve it. One theory would say that you will need to build a pension fund that is worth ten times your average salary during your career, so if your average career salary is £35K, then you need to build a pension pot of £350K.
Other theory would suggest that you work it backwards, so if you will need £25K as a pension income at retirement, not considering your state pension, and you will need to have this level of income say for 20 years, then you need a pension pot of £500K (£25K x 20 years).
You need to start your pension planning as soon as possible, you need to contribute towards your state pension, you will need to join your workplace pension and if you are a self-employed person, then you need to start a pension plan as soon possible.
There are so many theories regarding how much money you will need at retirement, however, I think it all depends on what type of retirement you are looking to have and how much income you will need to achieve it. One theory would say that you will need to build a pension fund that is worth ten times your average salary during your career, so if your average career salary is £35K, then you need to build a pension pot of £350K.
Other theory would suggest that you work it backwards, so if you will need £25K as a pension income at retirement, not considering your state pension, and you will need to have this level of income say for 20 years, then you need a pension pot of £500K (£25K x 20 years).
You need to start your pension planning as soon as possible, you need to contribute towards your state pension, you will need to join your workplace pension and if you are a self-employed person, then you need to start a pension plan as soon possible.
Having a financial adviser every step of the way to retirement, would save you money, save you a lot of hassle, save you from making costly financial decisions, and it would potentially enhance your pension pot.
There is common misconception that the need for a financial adviser is only when you have a wealth that you want to grow or preserve, however, the main role of a financial adviser is to create wealth too.
There is common misconception that the need for a financial adviser is only when you have a wealth that you want to grow or preserve, however, the main role of a financial adviser is to create wealth too.
