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The importance of investing in a Private Pension

July 2015

After the recent financial crisis which has left the economy in a state of disarray, individuals are claiming it is becoming harder and harder to make provisions for their retirement. With the increasing costs of daily life, people are finding it difficult to allocate their monthly income into a retirement fund. However the importance of investing in a pension should not be undermined, and a private pension should be seriously considered as a long-term investment to secure yourself a comfortable future.

Concerns about your return

As a rule of thumb, the earlier you start to make provisions for your retirement the better.   The chances of saving enough for your old age and for your standard of living to remain the same upon retirement is made easier if you start saving early on.  However, the feedback from most individuals is that they are concerned about the return they will get on their savings and don’t feel comfortable locking away their money until they are aged at least 55.

Clearly the priority here is to ensure that the funds invested grow as much as possible.  In order for this to happen it is important to use a reputable independent financial adviser (IFA) who will navigate you through all the investment options.

Property is another option

With confidence in pensions at an increasingly low level, some investors and individuals have turned to property as an alternative of safeguarding investments for their future.   Whilst buy-to-lets (BTL) may appear to be a more ‘tangible’ route to invest your money there are numerous hurdles which can trip up the unsuspecting landlord.   BTL’s invariably require a great deal of time and money of the owner and are by no means ‘the simple option’.

With a possible interest rate increase next year affecting many BTL mortgages we could see returns in this area falling.

Managing your pension to success

With your personal pension, the value of your fund can grow over time with the right investment decisions. Usually, a fund manager will look to spread the risk across a number of investment opportunities such as GILTs, Bonds, Shares, Investment Trusts and Alternative Investment Markets.

The Government have also recently introduced changes to pension legislation which brings added benefits to savers. They have introduced the ability to access 25% of your pension pot tax free, once you reach the age of 55, with the rest charged at your prevailing tax rate. Pensions are also excluded from means tested benefits, so if you wish to claim any benefits in old age, your pension pot is excluded whereas your normal savings accounts are taken into account. Pensions also offer benefits against inheritance tax, if you pass away before age 75 you can pass on your pension tax free, or if you pass away after the age of 75 your pension will be taxed as income after 6th April 2016 for the recipient.

Don’t rely on the state

The general consensus is that in years to come, the state pension will be unrecognisable to its current form, with the likely evolution being a means-tested system which will become part of Britain’s welfare programme. Therefore it is more essential than ever to make the proper provisions and a private pension will offer you many tax benefits, either as a means of topping up a workplace pension, or if you’re self-employed or are a workplace employer.

How to choose the best deal

Finding the best financial adviser for the job can seem like a daunting task. The best option is to look for an IFA who offers an annual fund review, and one that offers a comprehensive financial statement which accurately details your level of fund appreciation and their charges levy.

Get the professional advice you need

Aston Shaw have worked tirelessly with reputable financial advisers in the local area to find our clients the best possible deals on their financial packages. If you’re interested in contributing to a private pension fund or you’re interested and want to find out more book a free meeting today to better understand your options and what we can do to set up a positive long term plan for your future. Further to this, it can be important not only to review contributions but to also recover any dormant or forgotten pension pots, these can be recovered and put to work alongside your current pension plan.

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