If you’re coming straight out of university or even in your mid 20′s, then you know it’s a tough time with high rent, wage freezes and high unemployment in the ‘youth’ age group.
Now you can add one more problem to the list, however unlikely it seems, pension planning. With the buying power of the state pension decreasing and the retirement age rising, not to mention the increasingly ageing population, relying on a state pension that might not even be available or worth something in 50 years is a bad plan to rest on.
The pension age calculator on the UK governments Directgov site calculates that a 26 year old (born in the year 1984) will be able to retire at 68 years old, in the year 2052.
Fast forwarding to 2052, if the state pension rate is by some miracle roughly the same level as it is today (97.65 weekly, by this I mean the equivalent after inflation, if it stays at 97.65 in 2052 then we’ve got very serious problems!) then it would be ok, nothing to write home about but not the terrible pittance doom mongers say it will be, if you’re debt and mortgage free that is.
Though the number of people reaching the retirement years debt free is shrinking every year, this is why pension provision needs to be started earlier in people’s careers. Ideally, as soon as your income is enough for you to afford the monthly payments into a pension scheme, it should be started. With different pension funds, offers and deals on the market, approaching a pension expert should be the first step, so you know of any potential pitfalls in the Ts & Cs or small print before you sign up to anything.
Most people will take the easy route of joining their employers’ pension scheme. All the major corporations have one, which is usually a joint contribution affair, but at the same time you would have to have been living under a rock not to know it’s increasingly difficult for new employees to enter these schemes.
Final salary schemes are coming closer and closer to extinction, they are costing companies too much money and effort to maintain, so if you’ve not secured a place on one, it looks like you never will. With this door firmly shut, the next options are the major banks and building societies of the high street.
With no employer run pension scheme to join, many have to turn to the minefield of the open pension market, and it can be difficult to navigate, don’t expect any help from comparison websites or other modern tools to help make the search easier. However, there are benefits to be found that an employer scheme would not have, banks, insurers and building societies have greater scope to personalise plans to the individual.
The most informative way of finding the best pension schemes is ask in every branch of every financial institution, though this way you will not gain the whole picture as any advice you gain from these branches will be biased. To counter this, you should start with an independent advisor who will offer impartial advice for the whole pension market, telling you what is best for your circumstances without the need to plug any plan or scheme. Not only this, but the complexity involved with starting a pension plan can be surprising, with choices to be made on stakeholder plans and Sipps as one example, getting it right now ensures you don’t lose out in the decades to come.
Having the help and experience of an Independent Financial Advisor (IFA) can be a cost saver and lead to less stressing over the coming decisions. You can search your local area for all the IFA’s, check their qualifications and settle on one you feel will do the best job, shop around in laymen’s terms. The complex pension plan market will be much easier to navigate from here on in.
Howard writes for Just Commercial Mortgages the UK’s No1 site for the latest commercial mortgage rates and commercial property finance news.