In its simplest form, a pension is a tax-efficient way to save for your retirement. When the time comes for you to stop working, you don't want to worry about your finances. Also you need to plan for it over time. A pension can be a big step towards a more comfortable future by giving you a regular income.
The money in your pension pot is invested in funds with the aim of growing the value of your pension. The sum you end up with when you come to retire is used to buy an annuity (to provide you with an income for the rest of your life) or you can possibly take benefits directly from your pension plan with income drawdown. Which is right for you will depend on a person’s individual circumstances.
Besides the State Pension, however, if you also saved for extra pension advise will be needed as to what is the best action needed to make your hard earned savings last longer.
Is the Basic State Pension enough for you?
Like the name suggests, the Basic State Pension is unlikely to give you enough income to fulfil your needs at retirement. In the current tax year (2014/2015), the most you'd get per week is just £113.10 (or £180.90 if you're married).
You might be able to get more with the State Second Pension, which is a top up to the Basic State Pension, but this will depend on your personal circumstances, such as if you're earning over £5,772, caring for a sick or disabled person, or receiving certain other benefits due to illness and disability. You could also be eligible for the Pension Credit if you have a relatively low income.
Extra Pension Savings
There are schemes which allows you to financially plan with certainty for your future:
Pre-retirement – Here you may be able to learn what your pot will be worth AND what your minimum income for life will be at any point in the future. You also have the ability to target what future income you want/minimum income you need, and secure it now! This works brilliantly alongside cash flow modelling!
At retirement – Here you may be able to have a sustainable minimum income for life, whilst retaining complete flexibility. This income can be varied at any time, giving you flexibility to adapt to any changing circumstances.
You can also be provided with access to invest in a volatility controlled portfolio which over the longer term will maintain your fund value, whilst insuring you against the risk of poor sequence of returns. These contracts therefore give you the ability to grow your assets, whilst retaining peace of mind and access to your money at any time.
