|
I don't want to scare any of you off, but there's something
about it that makes people want to run away. It's that P-word that seems to inspire
an unhappy mixture of fear, confusion and mind-numbing boredom. I'm talking about
pensions.
And young people in particular are pension-phobic, seeing them as something for old duffers and not really anything to worry about until a distant future when all your top CDs have been re-filed under easy listening.
But you could be missing out on a bargain, because the earlier you begin to invest in a pension, the cheaper it becomes. And signing up for a pension soon after you start work in your twenties could mean saving a great big wedge of money later in life.
And, just to play the voice of doom, the alternative to not having your own pension, is going to be not having any money, because the basic state pension will be worth very little by the time you retire.
Apart from a bad image problem – because the word pension just makes you think of 'old age' and 'past it' – another barrier to young people taking out pensions is that they seem so massively confusing. They're full of terms such as money purchase, final salary, annuities, SERPS and AVCs.
But when you strip away all the jargon, what we're talking about is investing a stash of money when you're working, which will pay your bills when you stop working. And when you think that you might be retired for 20 years or more, it needs to be a big stash.
The first decision to make about pensions is whether to enter a work-based scheme or to set up a private pension – and the best option if it's available is almost always to join a work pension .
If you're not eligible for a pension through your employer (which is often called an 'occupational pension'), then you will need to buy into a private pension.
The basic concept of a private pension is that you make a payment each month to a pensions company that invests the money on your behalf – and on retirement it will begin paying out a regular allowance and maybe an additional tax-free lump sum.
If you're considering a personal pension, check out the charges, because these are going to take a chunk out of whatever you're paying in and it's worth getting advice on how pension-plan costs compare.
How much you receive at retirement will reflect how much you've paid in when you've been working – and for both an occupational and private pension, you can make additional payments to make your pension a little plumper.
But there have been concerns that the current pensions system, based around people in well-paid, full-time jobs, is leaving too many people out of the chance to prepare for their retirement.
So from next year, there will be a new type of pension – called a 'stakeholder' pension – run by the government.
— Sean Coughlan 20.11.00
Get more info on stakeholder pensions here.
Find other useful websites about pensions here.
Find out about work pension schemes here.
|
