Personal Pensions

personal pension options for a more comfortable retirement

A personal pension plan is to provide you with an income in retirement.  Your contributions are invested to give you a retirement fund that you can use to provide a taxable retirement income and also the option of a tax-free lump sum.  They are independent of the basic state pension and any company pension that you may have. 

Personal pensions give you control over how much you contribute and where the money is invested.

The more you put in, the more money you have to invest for your future – and the better your underlying investments perform, the higher that value will be.  Note that not all investments perform equally.

Which personal pension plan is best for me?

There are three basic types of personal pension plan and the one that is best for you will depend on various factors including your age, how much you are able to contribute and your attitude to risk.

Stakeholder Pension Plan

The simplest pensions, these are designed to encourage lower earners to save for their future and are subject to restrictions on charging, meaning they can be a cheap and efficient way to start saving. Because of the cost limits, the range of investments might be restricted, as may some of the additional options, but you will usually find index tracker-type funds and multi-asset managed funds which will suit most people’s basic needs.

Individual Personal Pension Plan

These pensions offer access to a range of different funds and may have added benefits which will make your management of them easier if you are looking to add value over a basic managed or tracker fund, or switch around different types of investment. They are not subject to the same charging restrictions as stakeholder so the fund choice can be wider and they suit most pension requirements for most people.

Self-Invested Personal Pensions (SIPPs)

These are the most sophisticated personal pensions and allow a huge amount of investment flexibility if you are either very active in your investment allocation or adventurous in your choice. SIPPs allow investors to access funds, shares, bonds, gilts, property and cash – and occasionally some more esoteric investments as well. They therefore allow you to build a portfolio specifically tailored to your needs and make adjustments to that portfolio whenever and however you like.

As a result, compared to the choices above, SIPPs have been relatively expensive.

In some cases, however, charges have reduced and a new generation of ‘low cost’ SIPP’s have emerged, which offer the same switching and management flexibility but without quite the same access to the more esoteric investments.

Before buying any pension plan, ask yourself these questions:

• How do you want to spend your retirement years?
• Realistically, how much pension income will you need to achieve this?
• How much can you afford to contribute each month?
• At what age are you planning to retire, how long to do have to save between now and then?
• What risks am I prepared to take, or not as the case may be? 

When you have the answers in mind, take professional advice from a trained advisor.  But don’t delay because the earlier you begin putting money away, the more those contributions will add up over time and the longer they will have to grow. Learn more about your personal pension options by contact us today on 0141 764 0040.

Personal Pensions