Whether you are 20 or 60, it is vital that careful consideration is given to the amount you could be receiving when you reach your retirement. How many of you, when you were younger, thought you would like to retire at 50, but now you have reached your half century, discover how little you have managed to amass into your Pension Fund resulting in a provision which would not even cover half the expenses of living in the second Millenium?
You are now resigning yourself to having to continue working for another ten or even fifteen years to afford to live and build up quite mediocre pension, but even when this matures you could find that, with inflation, your pension is worth less and that annuities have come down in value.
Reports being received from Actuaries are now suggesting that today's young men and women, even if starting subscribing to their pension as soon as they commence working, will not be able to retire until they are 70 because, with low returns, the Fund is not able to provide a decent pension until they have reached this considerable age.
You may be one of the eighty per cent of our population who are taking very little action to provide for the future, leaving subscribing in any real tangible way to your pension until you have nearly reached retirement age. One of the all too familiar comments I hear is that we are too young to think of old age or, when the children have finished at University, we will consider it, or when we have finished looking after our elderly parents. The cost of delaying providing for a pension doubles every five years so, therefore, you should if at all possible, start at the earliest opportunity.
The one big advantage of pensions over other forms of investment is that the contributions are allowed for tax purposes. This means that, if you are a standard rate tax payer, for every 78p you put into your pension, the Government will insert a further 22p which in itself represents a return of 28%. If you are in the situation of paying 40% tax, for every 60p you put in, the Government will give you 40p, an incredible return of 66 2/3%. Yes, when you receive your pension, you will be taxed but as this is, for most people, their only income when they retire, the tax rate will normally be lower and you can usually take 25% as a lump sum free of tax.
The Government recognises the importance of doing something to encourage the British population to invest more money into a pension and last year the Stakeholder Pension was introduced. No longer do you have to have earned income to enable you to start funding for your pension, as you did previously. Today, a baby on the day he or she is born can have a pension set up for them and monies from £20 up £3,600 per annum gross can be put into this fund. Even though the baby is not paying tax, the Government will add the standard rate of 22p in the pound on every 78p inserted. Therefore, a number of wealthy parents and grandparents are ensuring that the new arrival is introduced to their Pension Scheme on the day they are born into this world.
You may have seen your Pension Fund diminish by some 20%+ over the last two to three years, due to the Stock Exchange collapse and wonder as to whether it is still worthwhile to put money in, when the Stock Market is continuing to fluctuate. All pension companies have a variety of funds into which you can choose to put your money, some of which are considered to be more risky than others. You can switch from fund to fund at no cost. However, it may be sensible to find an independent financial adviser to help you to decide which fund is best at the moment. It can make a tremendous difference. If you had, over the last two and a half years, put your money into one of the leading property pension funds, you could have shown a growth of 8% per annum or 20% in the period, as opposed to a loss of around 20% in the normal funds, an incredible 40% difference.
Pensions, like most investments, can go up and down in value. If you are concerned that you have not provided enough, or you have some difficulty regarding the whole subject of pensions, please do not hesitate to contact us and I will endeavour to deal with your queries as quickly as possible.
We do look forward to hearing from you. We are here to help you.