09:10 28 January 2014
Every working individual should look toward the future. There will be a time when you cannot earn money. Joining a pension scheme is essential in safeguarding your financial future. Haven’t joined one? Are you sceptical about the whole idea? You need to have a plan to make sure that you are taken care of.
Distinguishing between a state pension and personal pension
The state pension is the one that you are entitled to when you have attained the retirement age. Most people do not rely solely on this type of pension because it offers very little. Coupled with private pensions- both company and personal pensions, the retiree is taken care of. Note that company pension schemes are set up by companies.
Why should I join my company pension scheme?
A company pension schemes offers you access to a large sum of money because your employers will make contributions to the pot. Larger pots mean greater investments and inevitably great returns.
Previously, if spouses split up, the guy who had the pension keeps all the money to themselves. However, the government has set up measures to ensure that divorcees are taken care of when the linked pension matures.
If you are going to retire early, you stand to lose a lot. Statistics show that 50 per cent of the pension pot is gone if you retire early. This applies to money-purchase and SIPPs.
How do you check the pension pot’s performance?
Checking your pension performance is crucial if you have a personal pension or a money-purchase scheme. You can check the performance of your pension using online calculators. In case of money purchase schemes, you can check the rate of growth of the fund against the growth of the FTSE index. It should provide you with a good indication of how the scheme performs.
Making the switch
You stand to lose your pension if you switch around. Exercise discretion when you are doing so.