More Pensions
I had intended looking at getting the best from your holiday cash on my regular Reporting Scotland slot this week but my mailbag (or more correctly my email in-box!) is still so full of pensions queries that we decided to cover this again, and I’ve decided to have another blog on the subject.
I want to cover two specific areas that lots of you have been writing in about. Firstly why have a pension in the first place and secondly what should you do with old pensions that relate to previous jobs?
The why question is simple really. If you don’t have a pension at work, and you don’t set up your own then you will only have the Basic State Pension to fall back on – assuming you qualify for that – and that’s currently under £100 per week. So if you’re happy with that, don’t read any further!
If not then you need a pension. Actually you don’t. What you need is money when you retire. It’s just that for the majority of us the best way to provide that money tax efficiently is by paying into your employer’s pension or setting up your own.
If you know you’re going to win the lottery on your 60th birthday or that your parents will leave you a couple of million when they die then again you can stop reading now!
Pensions are no more than tax efficient savings schemes. You pay money in now, you qualify for certain tax reliefs on that investment, the money is allowed to grow in a fairly tax efficient fund and when you take the money back at retirement some of it is tax free! It’s a no-brainer really, but it has to be planned and it should be planned along with the rest of your finances to make sure that you have money available at the times in your life when you are likely to need it.
The second point that lots of you have been asking about is what to do with the old pensions you have from previous jobs. And the answer is to get them all together and ask someone who knows whether there is a benefit in consolidating them all into one investment, or whether they can all be rolled into your existing occupational pension if you have one.
It will cost you money to do this but it is likely to mean that you will have a much more streamlined pension strategy going forward and that all of your pensions will work more effectively to produce a better benefit for you at retirement.