Women need to understand how to go about retirement planning…. because this is about YOUR future financial security. Yes, there are always other priorities, and many women tend to put other things (and other people) first, but when it comes to how you are going to enjoy your later life, it is time to make your needs a priority for a change.
Pensions are one of the best ways to save – the tax breaks are one of the few ways to get money back from the government. Invest £800 and, as a basic taxpayer, this will be topped up to £1,000 with £200 tax relief. If you pay tax at 40% you can claim another £200 tax relief – so £1,000 invested in your pension only costs you £600. In addition, your money grows free of tax and when you take money out of your pension 25% of it is tax free. In cash terms, pay in £200 a month and the minimum you get in tax relief to go towards YOUR financial future is £600 a year.
Pensions are not just for “old people” or something you think about when you get into your 50s or 60s because you can now access the cash in your personal pension and many employer pensions from the age of 55. If you leave it too late, you’ll have nothing to take out! Also you don’t have to wait until state retirement age – or even have to retire – to access your fund. So you could, if you wanted to, take out some cash to pay-off your mortgage in your 50s, and then carry on working as well. Also the earlier you start saving the better. If you leave it late and only have 10 years to save for a retirement that could last 25 years, it is going to be very expensive. Also the earlier you start, the longer your money has potential to grow.
Pensions are now much more flexible…if you have your own pension, you don’t have to commit to a set amount each month, but can pay in what you can when you can. You can take out as much as you want from your pension fund, when you want (with 25% tax free) and spend it how you wish from age 55 (although some employer schemes have different rules). This is because you can now take your pension more flexibly as you no longer have to buy an annuity (which gives you an income for life, but is also a lifelong commitment to just one rate of income).
Pensions do not have to cost a fortune… So don’t think “I can’t afford” to invest in one. You can start saving with around £50 a month. Ideally, you need to set aside more for your retirement – but anything is better than nothing.
Pension investing can be quite exciting – yes really! You can even manage your own investments online, select what you want to invest in, keep track of how your cash is growing and see how well your “funds” are doing. Have a look at standardlife.co.uk to check out DIY and SIPP pensions which put you in control. With a pension you don’t have to part with your investment and then wait for a year to find out how well it is doing – you can enjoy watching it grow.
If you still feel bewildered by the thought of pensions – remember they are not that complicated. You put money in, it gets tax relief, grows free of tax…and then you get to spend it! Just go to standardlife.co.uk and click through the easy-to-read guides starting with “Why do I need a pension?” and you’ll soon start to understand more about planning for your future.