Spend or Save-Is A Pension REALLY Worth It?
For years many people have avoided putting their hard-earned money into a pension fund. They found the schemes to be overly complicated and under-explained. Then came the time they needed to retire. While some found they could retire successfully others found that relying on a simple state pension was not enough.
What many people do not realise is that a state pension is only meant to provide a foundation needed for retirement. Your retirement savings from a work-based pension should ideally supplement any other costs you may have during your retirement. The perfect retirement pocket would ensure that you are able to pay off your house and other debts and continue to live to the same standard as you did before retirement. There has been huge strides in pension reform in recent years, none more so that the introduction of QROPS pension schemes in 2006. Basically with the change in culture, migration and people moving abroad permanently, QROPS schemes (Qualifying Recognised Overseas Pension Schemes) were introduced by the HMRC as a way of letting people takes their pensions with them when they move abroad. Many QROPS pension advisors explain in depth what you can and can’t do with your private pension when moving abroad but in the main, the benefits far outweigh the negatives.
Why is saving for pension important?
There are millions of people around the world who are refusing to put a little extra into their retirement fund. This will result in them having to retire much later than those who have a properly functioning retirement scheme. Other problems with not putting enough money away when you are young could be that you will have to put in more as you get older. And, you may have to get accustomed to a lower standard of living than previously.
Reliance on the state
A staggering 60% of those entering retirement will rely on a meagre state pension and even if they are able to qualify for the full pension, they will be left with less than they had hoped to have during their retirement. Saving for a pension can take a number of forms, but whichever you choose needs to suit your lifestyle. If you plan on traveling when you retire you really need to think about putting a little extra aside. A state pension will simply not cover this type of lifestyle.
Pension Saving Advantages
If you’ve already decided that you want to put a little extra money away for the day you retire you need to know that there are several ways in which you can go about it. One of the first advantages of saving for a pension is that your savings will grow faster than they would have without the scheme. In short, having a pension fund is very much the same as buying into a long term plan for saving. The only difference with this type of saving is that in the end, there will be what is known as tax relief.
Advantages of Tax Relief
Tax relief on pension refers to the taxable funds which would have gone into government coffers. These funds are instead of being paid to the government are paid directly into the pension fund. When a person selects to invest their funds into a pension scheme they are choosing to save wisely. The funds in the pension should be allowed to grow in contributions throughout your working career. In doing this, you will have succeeded in providing a liveable income for retirement.