Choosing a Pension

 Your future standard of living may largely be dependant on the type of pension you have.

If you are in a “Final Salary” (or superannuation) pension scheme, your pension depends on your salary and your length of service. These schemes are becoming increasingly rare, if you have the opportunity to join one then almost without exception our advice will be to do so. You will still need to make sure that this will provide you with sufficient income to maintain your standard of living in retirement so a meeting with an adviser is strongly recommended.

Typically you will have to build up your retirement pot through what is called it is called a “money purchase” plan, where the benefits available to you will be determined mainly by the size of the pot.

There are various elements that go to make up a good “money purchase” pension plan, and most people need help with this. Here is a start:-

Flexibility. The days of a “job for life” are over, and today people change employers many times before they retire. Your own personal circumstances may also change as you go through life. You need to choose a plan that can cope with the changing world and you don’t want to end up penalised by have the wrong plan as your life changes.

Investment Choices. Saving for your retirement is a long term project, and until you come to take the benefits, all you are actually doing is investing, with government help. Among other things, the amount of your final income will depend how your money is invested. It is vital to talk this through fully with an adviser, who will help you match the right choice of funds to meet your own specific needs, taking into account the level of risk you are prepared to take. If you already have a pension, it may be worth discussing the investment profile with an adviser to make sure it is working properly for you.

Charges. All pension plans will have a running cost attached. Generally, they are much lower today than they were years’ ago (so if you have an existing pension it is worth checking to see if it is still competitive). Some types of plan such as Stakeholder, and the proposed new Personal Accounts will have maximum levels of charges imposed by the government. Other plans may have similar charges but may offer extra potential benefits. The level of charges may make a big difference to the size of your final pension pot, but this is only one element in the decision process as to which plan is best suited to you. Your adviser will help you choose the right plan for you.

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