According
to Office
for National Statistics* 61% of single pensioners
in 2006/07 had total pension income of less than £10,000
per annum and 45% of pensioner couples had less than £15,000
income - this highlights the view that we as a nation
do not take our retirement planning seriously enough.
When we consider that whilst we can work we must not only
find enough income to provide for our current standard
of living, but we must also find enough to continue providing
for potentially another 20 or 30 years, maybe longer!
So how do you achieve such a task? One of the most common
and tax efficient methods is to take out a pension product
suited to your own individual circumstances.
What
is a Pension?
A
pension is a vehicle (plan) that generally incorporates
funds, or a scheme with defined pension benefits, that aim
to provide you with a regular income in your retirement.
There are many types of pensions, including some that are
provided by employers and some that you can take out yourself.
As
long as you meet the rules and limits set by HM Revenue
& Customs you will get tax relief on your contributions
- meaning that the government will add to your pension contributions
at a rate dependent on your personal tax status - so they
are very tax efficient indeed. There are limits to what
you can pay into a pension, and to receive tax relief, which
are based on your personal income - but even if you don't
have any earnings, you can pay up to £3,600 each year
(inclusive of tax relief) into your plan. Additionally,
depending on the type of pension, your employer may also
pay into it.
What
Types of Pension Are There?
Pensions
come in many forms, from the Basic State Pension to pensions
for Company Directors. Our wealth of experience can help
select the right type of pension that is best suited to
you. These may include:
- Personal
Pension Plans
- Stakeholder
Pension Plan
- Self
Invested Pension Plans (SIPP's)
- Small
Self Administered Schemes (SSAS's)
- Money
Purchase Scheme Switches
- Occupational
Pension Transfers
- State
Second Pension (S2P)
- Contracting
out of S2P
For
those of you who have existing pension benefits and are
looking to retire, it is also recommended that you seek
professional advice on how best to receive these in retirement.
There are numerous options and facilities available from
many providers, with just a few listed here:
Making
the most of your retirement funds by choosing the right
option can make a considerable difference to your retirement
income.
What
Pension is Right for Me?
Because
there are so many pension types and the fact that everyone
has there own individual circumstances, making the right
choice of pension and also investment
funds can be complex. Whether you are looking to improve
on the benefits you hold with your current employer's scheme,
want to see if you can transfer previous pension scheme
benefits or funds, or simply looking to start up a new personal
pension, then getting professional, qualified and independent
advice is essential.
Why
Should I Take Out a Pension Now?
According
to figures
issued by the FSA, a 20 year old person would need to
contribute £100 per month to a personal pension to
achieve a monthly pension income of £477 from age
65. However, if you were just 15 years older you would have
to contribute double that amount, some £200 per month
to achieve the same figure! It is also important to note
that inflation of retail prices (measured
as RPI) can erode the value in today's terms of these
projected incomes. So what does this all mean? It means
that if you have a projected shortfall in the standard of
living that you want to achieve from your selected retirement
age, then you should act now - because every month you wait
can make the cost of achieving that target more expensive.
Balfour
Wealth Management's specialist pension advisers can review
and analyse your personal circumstances, needs and risk
profile to find the most appropriate pension for you and
help to determine what you need to save to aim for your
retirement. Contact us now to
get your free confidential independent review.
*
Office for National Statistics 14th July 2008 Pension Trends
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