Do I need a pension?
Many people don't take the opportunity to arrange a pension plan. There are other things in life, particularly at a young age, which people would find more important than organising a pension. This is perfectly normal, but a major role of a financial advisor is to ensure the protection of a person’s long term financial future, and starting a pension scheme is one way of doing this.
It is highly recommended that you arrange a pension plan when you're young so you can have a comfortable nest egg for later life.
Pensions are basically a way of building up a lump sum, whilst saving on tax payments, in order to sustain your income after you have stopped working. There are many types of pensions to choose from, but with a bit of research and guidance from a financial advisor, you can find the right pension plan to suit you.
Despite the fact that UK citizens are entitled to a State Pension, this will not be enough to live on comfortably once you retire. If you have a separate pension plan, then this can boost your income and help to make sure that your lifestyle and needs are sustained in later life. If you do already have a pension, make sure that it's regularly reviewed by a financial advisor in order to make sure that you are still in the best plan for you.
It is never too late to start saving into pension plan; start young - it will cost you less.
Here are a couple reasons why starting a pension as early as possible is beneficial:
Compound Interest
Interest is added on to your pension usually annually or monthly. Compound interest is calculated not just on the money you deposit into the pension plan, but on the interest that has already been earned in the plan. This means that if you paid £10,000 into a pension fund over a 10 year period you would have more money than if you saved £10,000 in a fund without compound interest. Hence the earlier you get your money into a pension scheme, the more money you will make on it
More saving opportunity
Many people seek financial advice in their late 40's and 50's admitting that they have failed to start a pension scheme. While we will never say it is too late to start one (and it isn't), we cannot emphasise the importance of having time to allow your fund to grow, especially if it is heavily investment-based. It's not like anyone is forcing you to commit hundreds of pounds a month, but starting early and contributing regularly will significantly boost your retirement fund.
Even leaving it a further 10 years from your current age could mean that your fund could be worth only half the value it could have been if you had started 10 years before.
While many people argue that there are alternatives to a pension, such as investment ISA's, there isn't another product that provides you with tax-relief in the same way, and for this reason alone if you are going to save for your retirement, you really do need a pension.
Pensions are not straight forward – most people who take out plans will have to contact a financial advisor upon doing so, but the benefits of doing this should not be underestimated.
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