It is hard to
argue about the importance of saving for old age. Those still of
working age need to look at how they are going to finance their later
years. Those already retired need to think about getting the most
out of their available finances. The exact rules around pensions and
savings can be changed in line with government policy at any given
time. Indeed the pension system has just been through an overhaul
and with an election looming, politicians of all colours are setting out their
plans for the future of pensions and the pensions of the future. In
reality, however, these plans only have any meaning to people who are focused
on saving for retirement. Let us therefore look at some key
questions on the topic.
What
Is A Pension Pot?
Quite simply
a pension pot is a common term used to describe savings which are specifically
to finance retirement. People contributing to a pension pot may get
assistance from the government (in the form of tax relief) or from an employer
(in the form of contributions). Pension contributions are usually locked
away until you reach retirement age.
How
Do I Calculate My Pension?
There are
plenty of online calculators to help with this. We strongly
recommended to keep track of how your pension is doing so that you know where
you stand. If you do decide you need to take action, sooner is
usually better than later.
I
Do not Like What I'm Seeing, How Can I Build A Healthier Pension Pot?
You can save
more money, you can manage your savings more effectively or you can do
both. It can help to look at this question in the light of your
overall financial situation. For example if you are carrying
high-interest debt, such as credit-card debt, then it may well be in your best
interests to focus any spare cash you have on paying this down.
Once you have
cleared your debt, you can then divert the funds to building your
pension. If you do have spare cash and are in employment, then it
may be useful to look at making extra contributions to your workplace
pension. This can be particularly helpful if your employer will top
up any contributions you make. If you're unsure about locking cash
away until you retire, then it may be worth looking at ISAs as an
alternative. Although contributions to ISAs are made out of post-tax
income, generally speaking the income they generate is tax-free and the money
in them remains accessible if you need it.
What
Do I Need To Know About Getting More From My Pension Pot?
For many
years getting more from your pension pot generally meant getting the best deal
on an annuity. Now there are more options for those with pension
pots. With this in mind, it can be very helpful to get some
professional advice before taking any significant decisions on how best to use
your pension pot.
It is also
advisable to keep up to date with any changes which may affect
pensions. For example at the current time, the Conservatives have a
proposal to allow holders of annuities to sell them on. If enacted
this could have massive implications for existing pensioners.
It's also
worth remembering that, generally speaking, pensioners have access to the same
savings and investment products as those of working age. For example
they get exactly the same ISA allowance as working adults. There are
even some savings products tailored specifically to their needs (e.g. pensioner
bonds). These can all help pensioners to make the most of their
finances.
For more information please do not hesitate to
contact the team at Ward Williams Financial Services Ltd on 01932 830664 or
by email on wwfs@wardwilliams.co.uk.
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