Pension Options: A Future in the Sun

Pension Options
The connotations of the word pension can sometimes be construed as a little soft and fluffy. To many it evokes images of people who, having been issued a bus pass, are happy to spend their time in the garden or in tearooms – wrong! Today’s retirees consist of a broad and dynamic demographic, many of who are looking for adventure and have the money to find it.

It is, perhaps, time we refreshed the way we think about our pensions and time that we started to look at them for what they really are. Your pension is your ticket to a secure and comfortable future, it’s a saving scheme and over the last 10 years it has become increasingly important.

There’s a wide variety of pensions available and so here’s an overview of some of the schemes that are on offer.

State Pension

The first thing to know is that a State Pension is available to those who are British citizens and have paid enough National Insurance contributions. The age at which you are eligible varies and currently those receiving a full State Pension will receive around £155 per week.

Self-Invested Personal Pension (SIPP)

On the flip side of the coin, you have SIPPs. Known for the greater control available within this option, SIPPs typically fall into two options. The first is to invest your pension in a Ready-made Portfolio, where the money you put in is invested by experts on your behalf. The second option is to choose your own investments, giving you total control over what is done with your money. It may be useful to note that the latter is better suited to those who are more familiar with the financial markets and are willing to put time and effort into managing their SIPP.

Workplace Pension Scheme

Workplace pension schemes are perhaps the most common type of pension scheme. They can be very beneficial, as your employee, in many cases, will match the contribution you make. Your contributions are not subject to tax and it is likely that you will be able to “overpay’ into the scheme, should you wish to. Workplace pension schemes also have the benefit of allowing you to accrue money over the entire period of your working life which can add up to a healthy amount.

Private Pensions

This type of pension is one whereby you set up the pension yourself. The most common examples are SIPPs or stakeholder pensions. You make regular payments into the plan over time and choose how it is invested. There are many options in terms of how much risk you want to expose your capital to and a general rule of thumb is that the higher the risk the higher the potential for gains and vice versa.

When looking at pension options, it is important that you research all the possibilities and understand that you don’t have to limit yourself to one product. It is increasingly the case that people diversify the way they save for their future in the sun.

Photo: Tax Credits