Retirement Planning
Retirement planning is something that most of us put off for as long as we can. But the reality is that the sooner you start paying into a pension the higher your income in retirement is likely to be. If you're working you're usually building up the right to a basic State Pension – and possibly an additional State pension – but these may not be enough to give you the standard of living you want.
With the challenges the credit crunch has presented a strategy is needed to help you protect, repair, and recuperate your pension. Market cycles show it will recover but no one knows when and to what level. Whatever you decide, you cannot afford to do nothing. Retirement planning may be painful at the time, but it is not as painful as reaching retirement with inadequate provision and having to give up things you have taken for granted during your working life.
Types of pensions
There are three main types of non-State pension. They are:
- Occupational salary-related schemes - offered by some employers
- Occupational defined contribution schemes (also called money purchase pensions) - offered by some employers
- Stakeholder pensions and Personal pensions - offered by some employers, or you can start one yourself. You may also be offered a group personal pension at work. These are also money purchase pensions.
Pensions at work
If you work for a business with fewer than five employees, your employer does not have to offer you access to a pension scheme. You should still check what’s available, as some small employers may offer a scheme anyway.
The government is planning changes that will mean all employers will have to offer and contribute to a pension in future. Employers who haven't offered an occupational pension in the past may set up their own scheme, or may pay pensions into a new central scheme that is being set up.
What are the benefits?
Although you don’t have to join any pension scheme offered through your job, it’s usually a good idea to join an occupational pension scheme if it’s available because:
- your employer normally contributes
- often you also get other benefits, such as:
- life insurance which pays a lump sum and/or pension to your dependants if you die while still in service
- a pension if you have to retire early because of ill-health
- pensions for your spouse and other dependants when you die
Not all pensions offered by employers are occupational pensions. Your employer may offer a stakeholder pension or a personal pension through a group personal pension arrangement. These pensions are not called occupational pensions even though the employer may contribute.
