alt
Pensions matter.

I know it feels like right now they don’t, and that by the time you get old enough to draw a pension the world will have imploded anyway, but trust me: they matter.

Pensions feel complicated, and longwinded, and chock full of jargon, so here’s a few facts and tips to help unscramble some of the more difficult bits and get you on your way to thinking, planning, doing!

Why is a pension important?

A pension is your safety net. It’s the way that you will feed and keep yourself when you are no longer are able to work. Without it you might find yourself in a vulnerable position.

Some people claim that their property will be their pension pot but you need to be careful about this; property is not always guaranteed to keep its value, and although it’s great to own your own house it doesn’t translate to money that you can spend on groceries every week.

How do I know if I have a pension?

Everyone who works in the UK and pays, or been credited with, UK National Insurance contributions is entitled to the State pension (which is part of the ‘NI’ payment on your paycheque). In addition, by 2018, there will be automatic enrolment by every employer for all employees into the workplace pension.

How much should I pay into it?

Advice on this varies. You need to strike a balance between the ideal, and what is actually possible. Ideally you should save as much as you can afford to. The very loose advice on this is; ‘take the age that you started your pension, then halve it’. That’s the percentage you should pay. (Bear in mind this should also include your employers contribution.)

This means if you start at 30 you should be paying 15% of your salary into your pension pot. Like I said, not always possible for some, but just pay as much as you can afford to.

The government’s Money Advice Service does actually have a pension calculator you can use to help give you a more detailed idea of what you should be paying in.

alt

Should I also get a private pension?

On top of your State pension and your workplace pension you can also choose to pay into a private pension. Bear in mind; three pensions is a lot of pensions. However, it’s up to you and what kind of circumstances you’re in.

If you’re self-employed then you are not eligible for a workplace pension, so this is a good choice for you.

I grew up abroad and my parents paid into their state pension and teacher’s pension whilst they were away, but also opened up a private pension they paid into ON TOP of both of these.

This is an account that only you pay into (as opposed to a workplace pension, where your employer will also contribute), and so you need to do your market research to find the best deals out there. There are lots of comparison websites out there that make the job a little easier, or you can also go into a branch of your local bank or building society for some advice.

Citizens Advice give a good run down of the different types of pension available to you.

What exactly happens to my money when I put it in my pension?

With your State pension, the money is paid into the Government pot and then invested. What essentially happens (in its most simplified form) is that those working now, pay into the pot and pay for those generations who are retired. This cycle repeats itself and the generations that come after you will then pay into the pot when you are retired.

With your workplace pension your money will go to a third party of your company’s choosing (depending on your pension provider). You have more flexibility here in deciding how you want them to invest your money.

How do I increase/decrease the amount I pay into it?

You can’t increase your State pension contributions, but your workplace and private pension contributions you can absolutely change.

You will just need to contact your provider to notify them you want to alter your contributions. Most companies talk in % of monthly income so it’s usually simple enough to indicate ‘I wish to pay x% of my income’.

It’s really worth your while doing your research and understanding your pension options, and the earlier you do it the better. The future is always uncertain and it’s good to be as prepared as possible.


Save for a safer future with Oval Money

alt

#######BeMoneyWise