Have you been thinking about your future? Wondering when you’ll be able to finish work, retire and enjoy your years travelling, seeing family and enjoying the life you deserve? Maybe you’ve been considering how much money you’ll need to be able to live the life you want when you retire? Taking all that into consideration, you might be thinking about how to start a pension. Whatever age you are, a pension is a great idea to start planning for your future.
What Is A Pension?
Before we look at how to start a pension we need to establish what exactly a pension is. A pension is a great way to save for your retirement. Paying into a pension put gives you great benefits including tax relief on a proportion of your contributions. You’ll also pay into a pot which can then grow over the years, giving you more money to live on when you are older. A pension is a type of income you get when retirement age comes around. Depending on how much you contribute, will affect how much you get.
When Should I Start A Pension?
It is up to you when you want to start a pension. You can begin at any age. Ideally, you’d start your pension pot sooner rather than later. This is because the sooner you start one, the more chance you have of building up a pot that will allow you to live when you retire. This is because you’ve got more years to add into your pension pot and see the benefit of compound growth. General advice is that you should half your age and put away that percentage of your annual salary away each year. So if you were to start a pension at the age of 20, you’d put 10% into your pension pot each year. Obviously, the later you start, at the age of 45 for example, you’d be looking at 22.5%. Start earlier and you’ll save less for a longer time.
Pensions At Work
If you are employed by a company, it is now a legal requirement that they contribute to a pension on your behalf. If you are not part of your workplace pension, ask your employer today all about how to start a pension with them. A percentage of your pay will be put into your pension every pay day and most of the time your employer will also make contributions. Tax relief from the government might also be granted.
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Personal Pensions
There are 15% of workers in the United Kingdom who don’t work for an employer, so what happens to those? If there is no workplace pension available to them you can set up a personal pension. Even people employed can set one up to top up their workplace and state pensions. With so many companies offering personal pensions, it’s always worth checking that your provider is registered with the Financial Conduct Authority (FCA). Check the Pensions Regulator if it’s a stakeholder pension you are starting up. You can pay in via individual amounts or set up regular payments. The pension provider will then send you statements to tell you how much your fund is worth. It’s easier than ever to pay into these personal pensions with many of them having apps you can use on your phone to pay in and track your fund.
State Pension
Have you ever wondered what people mean when they talk about the state pension? If you are a resident of the United Kingdom and have made enough National Insurance contributions throughout your life you should be eligible for the state pension. There are two types of pension, depending on when you retire. If you retired before April 2016 and paid 30 years of NI contributions, you’ll receive the full basic state pension of £134.25. Anyone retiring after April 2016 having paid NI for 35 years will get the full new state pension of £175.20 a week. Making those National Insurance contributions will ensure you are saving for your future.
Lost Pensions
Once you know how to start a pension it can be hard to keep track. Many people set up pensions and then forget all about them. Maybe you are one of these people or have parents, friends or loved ones who have forgotten all about their pensions? You might be able to find lost pensions via the government website.
What Else Can You Do To Save For Your Future?
Aside from pensions, there are other ways you can save for your future. Pay into ISAs to build a tax-free pot of money. You might even be able to open ISAs where you’ll get a 25% top up from the government. How about buying stocks and shares? Or buying bricks and mortar properties such as a flat which you can rent out now and then sell in the future?
Figure out when you want to retire and how much money you will need per your to live the life you want. If there is a shortfall, how can you fill that gap? It might be worth talking to a financial advisor who can help you plan out your retirement portfolio. We now know how to start a pension but we also need to figure out what we’ll need to live on and everyone will have different situations. Get your finances in order and start figuring that future out.
