Your pension options explored
There are huge advantages to saving into a pension, like the fact that the government pays into your fund every time you do.
You might be feeling daunted by how much you need to save, or wondering how you can even start. But putting off sorting out your pension will only make it harder in the long run. The early years of a pension are the most important - these are the payments that potentially have the most time to grow. So the sooner you start, the more time you have to try to build up a bigger pension pot.
Small sacrifices now could really boost your pension pot
It's hard to imagine what you'll want to buy in 20, 30 or 40 years. But giving up a couple of 'luxuries' now will mean more ways to enjoy retirement.
Think of it this way. Imagine you save £30 a month by drinking two fewer glasses of wine a week. 1 Then think about investing that money every month for the next 30 years. This could buy you an extra income of £123 every month from age 65.2
A few small changes now could make a big difference to how you live your post-work years.
The government pays in when you do, so it costs less than you think
The government wants to encourage people to save for when they stop work. So the great news is that, in exchange for tying up the money until you retire, the government gives back some of your taxes when you pay into a pension!
For every £80 you invest, the government adds £20 - making £100 in total. If you're a higher-rate tax payer, you may qualify for extra tax relief. If this is the case we'll claim the first 20% tax relief for you and add it to your plan. You'll need to claim the additional tax relief through your tax return.
And while tying up your money may seem a disadvantage, it does mean that you've got a ring-fenced pot that you can't be tempted to dip into to pay for luxuries now.
The value of tax relief may change in the future and depends on your individual circumstances. Tax and legislation are liable to change in the future. The information here is based on Standard Life's current understanding of law and HM Revenue and Customs practice.
We're flexible. As your life changes, what you pay can go up and down
Pension planning is important. But we know it's not the only call on your finances. There will be times when you can pay more - after a pay rise or bonus, say. And there will be times when you'd like to pay less - you may have just bought a house or had kids.
That's why we've made our active money personal pension flexible (part of the active money lifeplan). You can stop, re-start, increase and decrease payments without penalty or charge.
- 1 Assumes these are glasses out in a pub at £3.50 a glass. Two glasses times 52 weeks divided by 12 months is £30.33.
- 2 Source: FSA pension calculator. Figure for a man aged 35 on 1 April 2009, gross earnings £30k pa, retirement age of 65, paying £30 a month into a pension. Makes various standard FSA assumptions on charges, growth and inflation.
Although we should all have savings we can access immediately if needed, you shouldn't treat your pension savings like a fund you can dip into - it's got to pay for your entire retirement.
As your life changes, what you pay can go up and down
Pension planning is important. But we know it's not the only call on your finances. There will be times when you can pay more - after a pay rise or bonus, say. And there will be times when you'd like to pay less - you may have just bought a house or had kids.
That's why we've made our active money personal pension flexible. You can stop, re-start, increase and decrease payments without penalty or charge.
Consider an ISA, too.
Saving into an ISA as well as a pension is a great, flexible and tax-efficient way to save for both the short and long term. You can access your savings when you need them. So while you're thinking about your pension planning, make sure you're taking advantage of the tax benefits of an ISA as well.
ISAs attract tax relief which the Government may alter in the future.
It's common to build up bits and pieces of pensions over time, which makes it hard to keep track of where you are. The good news is that you can transfer other pensions into an active money personal pension so that everything's in one place and take as much or as little control as you want.
You can transfer any existing pensions to Standard Life
You may have a pension you're no longer paying into (at a company you used to work for, say) or you may just be paying small amounts into a pension.
Having your pension in one place makes it easy to keep an eye on it and work out if you're on target.
You can transfer your existing pensions to Standard Life, and take advantage of our low charges (some of the lowest on the market) and a wide range of investment options.
Transferring may not be suitable for everyone, you could be giving up valuable benefits you may have with your existing plan and there may be charges for transferring out of your existing plan. You should always take financial advice before transferring a pension.
As your life changes, what you pay can go up and down
Pension planning is important. But we know it's not the only call on your finances. There will times when you can pay more - after a pay rise or bonus, say. And there will be times when you'd like to pay less - you may have just bought a house or had kids.
We've made our active money personal pension flexible. You can stop, re-start, increase and decrease payments without penalty or charge.
Find out more about the flexible active money lifeplan
Or simply Contact us to start planning for your retirement.
You need your own pension because the state pensions paid by the government aren't that generous. If you qualified for the full state pension (like most people who work full time from their late 20s)4, you would get £95.25 a week in 2009-10, or less than £5,000 a year.
You may also be entitled to an additional State Pension, which depends on your income. The rules for this are complex. But it's not going to make a massive difference - less than £7,000 a year. 5 Compare this to your salary now - and the increases you'd like in the future. This is why you need your own pension.
- 4 http://www.direct.gov.uk - you need to pay National Insurance Contributions for 30 years to qualify
- 5 Standard Life January 2010
Good question - the answer, of course, depends on inflation. Goods that cost £1,000 in 1979 cost £3,900 in 2009 6 - inflation averaged 4.7% over that period.
UK inflation has been lower than this recently. If inflation averaged 2.35% over the next 30 years, the price of goods would double. 7 So an income of £10,000 in 30 years' time would buy only what £5,000 buys you today.
- 6 http://www.bankofengland.co.uk plus last year multiplied by 2% for final year (calculator goes to 2008 only)
- 7 http://www.whatsthecost.com/cpi.aspx
The government wants people to save for their retirement. But it realises that people might not want to commit to saving into a pension that can't be touched for some years. So to encourage people to save, it gives tax relief on your pension contributions.
This means that, for every £80 you invest, the government adds another £20 - making £100 in total. This happens automatically.
If you're a higher-rate tax payer, you can claim back an extra £20 in tax relief via your self-assessment tax return. There are some restrictions on this for very high earners.
The value of tax relief may change in the future and will depend on your individual circumstances.
