Taking out a pension can feel overwhelming, particularly when you’re just starting out in the world of work. Retirement might seem like a distant dream but it’s never too early to start looking at your options.
The majority of people will receive a state pension on retirement to cover basic needs, but anything else will need to come out of your savings which is why getting a pension plan in place is so important.
What are my options?
When considering a job offer, it’s worth looking at the pension package alongside the salary and other benefits. Recent changes in the law mean that employers are required to enrol all eligible employees into a workplace pension unless they choose to opt out. There are alternative options, of course. You can manage your pension yourself using a private pension scheme or by taking out a Self-Invested Personal Pension (SIPP).
Things to consider:
When you’re deciding what kind of pension is best for you, consider what you can afford to pay in and what this means for your future. Many employers will match your contributions into a workplace pension which effectively doubles your pension pot. Work out what you need to live on each month and from there you can see how much you can afford to pay in to your pension. The more you pay in, the more you’ll have on retirement.
Workplace, personal, SIPP?
A workplace pension takes some of the pressure off. Your employer does the work for you so you don’t have to worry about where your money is being invested. You may however, be happier taking more control over your investment. If so, a personal pension or SIPP may be a better option.
Do your research
Whatever you choose, it’s worth doing some research. When starting a new role, you’ll usually receive a pack alongside your contract that includes information on the company’s pension scheme. Make sure you read it thoroughly and discuss any queries or concerns you may have with your new employer.
If you’re still not sure what to do, an independent financial advisor could help you understand your options.
You can also find a wealth of useful advice on the Pensions Advisory Services website.