Good Reasons You Should Invest in a Pension
21/07/2015 21:24
Retirement to many people is something that seems a long way down the line. Which means they will have no cause for concern about it anytime soon, especially if they will need to find the extra cash to do so each month. Although it may be a while off yet it doesn’t mean it’s any less important, so why not set yourself up for a comfortable retirement. It's important to get some solid advice from a professional financial adviser or accountant. Here are a few reasons why investing in a pension is a smart move.
The state can be unreliable
When it comes to your retirement fund the state pension plays an important role, but relying on it completely wouldn’t be wise. When you’re retired you will want to be living comfortably knowing that you have saved enough money, and for a lot of people the £113.10 a week isn’t nearly enough to do so. Even with that amount going up to around £148 in 2016 it still won’t be enough for people to live a luxurious lifestyle.
Unless you’re close to retirement it will be difficult to work out exactly what age you will be when you’ll be able to receive your pension. As people are now beginning to live longer, the age that you can receive your pension will only get higher.
By having a private fund that you will be able to receive when you’re 55, you will be giving yourself a retirement that will be a lot more flexible and comfortable when it comes to spending.
Saving national insurance
Some businesses will give you the chance to pay into your private fund through a ‘salary sacrifice scheme’. This works by taking a payment and putting it into your pension fund before it is taxed. This will reduce your income tax as well as your national insurance contributions.
It will pay a sum to your loved ones
The majority of work place pensions will pay out a lump sum to your loved ones if you die whilst working, which is tax-free. This will usually be around three times what you earn. For tax purposes a death-in-service benefit will usually not be included in your estate for inheritance.
You won’t be able to spend it all
Generally speaking you can’t have access to your pension until you’re 55 years old. You won’t be breaking any laws if you do so before, but you will be hit with a 55% tax charge. By leaving your money alone for as long as possible you are giving it plenty of chance to keep growing. With other large fund accounts such as an Isa that you do have access to, it is easy to spend it all when you decide you fancy buying a new car or taking the family on holiday. With your pension it’s not as simple as that and it just makes more sense to leave it alone.
Something important like a pension should be handled properly to suit your needs, and find you the right option depending on financial capability. It’s always worth seeking out some specialist advice whether you are planning retirement or already retired.