The working world has dramatically changed over the last few decades.
Alongside factors such as technology, the way in which people move from one job to another is equally different.
For instance, a few decades ago, people learnt a trade or profession and joined a company intending to stay there; if not for their whole working life; for a good proportion of it.
However, these days, people move around the globe; redundancies are common-place and things are very different. As a result, people’s perceptions of pensions have also changed.
Here are 5 factors to consider when reviewing your pension provision.
1. Longer Life
With medical advancement and better standards of living, compared with years gone by, we’re all generally living longer.
This is evidently an important factor with regard to saving money for life beyond employment. However, not only is there a potentially longer life, there is a potentially longer life to finance.
Additionally, there is also a growing gap between finishing work and receiving a state pension. In the past, the state pension was paid to women and men from 60 and 65 respectively. However, from 2028, you’ll need to be 67 before this kicks in!
2. Temptation Free
Opting for a pension scheme can prove preferential to investing in something like an ISA.
By putting money into a pension, you’re ensuring it’s tucked away until you’re at least 55 years old.
Therefore, psychologically, it really is long term saving.
Whilst ISAs and other schemes can be great for long term savings, the funds are much more available. If times run a little hard, the temptation can be to dip into these savings along the way. However, pension contributions are more out of sight, out of mind and out of reach!
3. Free Money
By 2018, the Government directed that all employers had to provide a pension scheme for all staff.
As such, even those employees who have not previously been involved in pension schemes are now automatically enrolled.
With automatic enrolment comes a massive benefit in terms of employers’ contributions.
Although by remaining in the scheme, you’re committing to pay into your pension fund, payments are deducted before tax. Equally, the money contributed by your employer is over and above your salary and it’s therefore, in effect, like getting a pay rise!
4. Tax Benefits
Although pension contributions are made before tax, when receiving your pension in retirement, it is deemed taxable income.
However, on retirement, it is possible to take out 25% as a lump sum, completely tax free.
Added to this, as an employee, if you’re a higher rate taxpayer, you save 40% when making your contributions but only pay 20% income tax when taking your pension. That has got to be good sense!
5. Flexibility and Accessibility
In the past, it was more difficult to keep a track of your pension plan.
For example, you would probably receive an annual statement in the post and little other communication.
However, these days, alongside increased choices; visibility and access to your pension scheme is available. There’s more capacity to have a greater interest in your pension scheme with online access 24/7.
Equally, there are also options as to whether to take your pension as a lump sum or as regular payments. Alternatively, you can keep it invested or even pass on any balance to your beneficiaries.
These days, flexibility is most definitely key.
To learn more, get in touch with us today.