Let’s be honest we all hope to be financially stable or wealthy at some stage in our lives way before we reach retirement age. It’s a fine balance between dreaming of riches and reality, hence why it’s a good idea to be prepared for the future especially transitioning into old age.
A pension provides a steady stream of income after retirement. It allows you to maintain your lifestyle without relying solely on savings or family support. Imagine having the freedom to pursue hobbies, travel, or spend quality time with loved ones without worrying about finances.
“I remember starting my first corporate job and receiving my pay with a deduction for pension contribution.” As you can imagine I wasn’t pleased and thought I need the money right now (21 year old me throwing a fit) not when I’m 80.
The best thing I did was leave the contribution alone for four years which I then carried on to the next job.
One thing to add. We are a little fortunate here in the UK and by default we get a state pension which currently pays £740.60 a month. This amount barely covers the utility bills in todays money so imagine what it will be like at retirement age with added inflation.
“It’s ideal to have a private pension scheme to supplement the state pension.”
Most people are enrolled on a workplace pension which is a way of saving for your retirement that’s arranged by your employer. A percentage of your pay is put into the pension scheme automatically every payday.
In most cases, your employer also adds money into the pension scheme for you. You may also get tax relief from the UK government.
Remember, as with any investment the value of your pension and any income may fall as well as rise it’s not a guaranteed amount.
“As of now my pension pot is forecasted to be a high £686k or a low £152k by retirement age.”
Usually your pension is invested with one provider like Aviva, Nest, Fidelity, Legal & General. Check with your employer and keep a track of this account.
When you change jobs your pension belongs to you. If you change jobs and enrol in a new workplace pension, you might be able to join your old pension with your new one. Your new pension scheme provider can tell you if this is possible.
“If you’re self-employed theirs no need to worry.”
Most self-employed people use a personal pension for their pension savings.
With a personal pension, sometimes called a private pension, you choose where you want your contributions to be invested from a range of funds the provider offers.
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