Pensions
Everything you need to know about pensions in the UK
A pension is a regular savings contribution with the purpose of allowing the saver to live without having to work at the point of retirement.
Even though some people prefer to ignore the fact that some day they will be old, everyone needs to plan for their eventual retirement. People are living for longer. People are generally more healthy than ever. This means that it is now more important than ever to think about what you will be living on in your retirement.
One of the great advantages of a personal pension is that it is entirely tax-free. Any tax you have already paid on the money you are putting into the pension (ie through PAYE), you will be given that money back from the Inland Revenue straight into your plan.
There are four main categories of pensions. Click on each for more detailed information.
The Company / Occupational Pension
Be sure to read our summary of the new pension changes that became effective on April 6th, 2006 (A-Day).
Why you really do need a Pension
Men in the UK can expect to live to the age of 81. That is, for 16 years after retirement. Women can expect to live for another 5 years - 86. At 26 years after, this is a long period to have to survive. These life expectancies are growing higher all the time as quality of healthcare in the country improves.
'But we have the State Pension', some people say. Sure, if they are content to live on just £75 per week. Ask yourself if you are likely to need more than this. Most people will nod 'yes, definitely!'. Then you had better get cracking and begin a retirement plan without delay.
Pensions are the obvious and easiest way to start a plan. Remember that interest on your deposits compounds. So that any delay now could cost you a lot later on.
The Pensions Commission has warned that 9-12 million people - up to 40% of the workforce - were not saving enough for old age, in the most detailed analysis of the pension system in years. Three quarters of this group have no pension savings at all, according to research by the TUC. Millions of people are heading for a miserable retirement.
Watchdogs, the government and the media are constantly trying to wake people up to this fact. You cannot rely on the State pension - you need to start a private pension asap!
Sadly the pension selling scandals in recent years have not helped people's confidence. But, ironically, in many ways the pension saver is arguably now safer than ever thanks to all the subsequent tightening up.
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