The world of pension schemes can seem daunting and complicated. If you’re just starting out, finding the best private pension can seem like a headache and you may need a little guidance to get on the right track.
Under auto-enrolment, most people who work full-time in the UK should now have the option of a workplace pension. You should make sure that you pay in enough to get the maximum contribution from your employer.
If you aren’t eligible for a workplace pension, or you want to supplement it with a personal pension, there a number of factors you need to consider.
Pick your preferred retirement date
Deciding when you want to retire will give you a date that you can work towards. You’ll know how many years you’ve got to save and you’ll also have a rough idea of how long those savings need to last.
For instance, if you retire at 55 (currently the earliest age you can access your personal pension pot) then you’ll probably need to have more saved than if you plan to keep working until you’re 70. Working longer also gives you more time to contribute.
Work out how much you’ll need to live
Do you want to continue living a similar lifestyle to your current one after you retire, or will you be happier on more modest means? Remember that your priorities and requirements may change as you get older. It’s better to overestimate how much you’ll want than to underestimate.
It’s better to overestimate how much you’ll want than to underestimate
Make sure you’re comfortable with the level of risk
Contributions into pensions are usually invested and the funds can go down in value as well as up. If your contributions are invested in higher risk funds, although there is the potential for the value to increase more than if they were invested in lower risk funds, there is also the potential for the value to reduce by a larger amount.
Ask for the key features document
When you’re shopping around for the best private pension, ask each potential provider for their key features document. This document summarises the important points about their pension. Look out for minimum contribution rates and consider whether you’ll be able to afford them. Also, take note of what charges and penalty fees might apply.
Consult an independent financial adviser
Expert advice can be invaluable when choosing a pension. An independent financial adviser can help you choose the best pension scheme for your needs. Be clear in your mind what you want your pension for and what you can afford, and then see an adviser who can help you to achieve this.