Why it pays to Start Early When it comes to Pensions

By: Victoria Cochrane

Whichever career path you choose, whether it be lawyer, hairdresser or postman, there is one issue you must be aware of: your pension. Indeed, it is never too early to start thinking about making provisions for your retirement. However, according to research a massive 52 percent of Britons are not paying into some form of pension scheme. This, say the experts, is worrying.

Considering your retirement period can constitute as much as a third of your life, it is considered essential that you start saving early on. In fact, the earlier you begin, the higher the financial payouts will be when you are retired, thus making for a much more comfortable life post-employment.

Nevertheless, many people avoid the issue because it can appear confusing and retirement can seem like a long way off when you first start working. But, with the average state pension only amounting to ?4,953 per year, it definitely pays to plan ahead and make sure that you can afford to live the lifestyle you became accustomed to throughout your employment.

The experts advise that even if you can only afford to save a few pounds a month in the beginning, this is a good start since any money you put aside will earn interest. Not only that, but as your earnings increase, you can always up the amount you pay into your chosen pension plan.

One of the best ways to start saving for your pension is to join a company scheme. Generally speaking there are two types available: salary related pensions and defined contribution schemes.

The first plan is directly related to your pay and the number of years you contribute to it. Offering you a proportion of your salary when you retire, you can expect to receive around a sixtieth of your annual wage, which is then multiplied by the time you spent at the company.

A defined contribution scheme, on the other hand, sees both employer and employee contribute money each month, which is then invested. Consequently, the amount you receive at the end will depend on how much was paid in, as well as how well the investment performed. This type of pension is the most popular since it offers more flexibility than a salary related pension and is still valid even if you change employers.

So remember, a bit of planning now can make a big impact on the future and can save you from the stresses brought on from financial hardship. And, regardless of where you work and what you do for a living currently, it is important that you start thinking about your pension as early as possible.

In doing so, you will be positively working towards financially safeguarding your future post-employment.

Warnings

• The value of your investment may go up as well as down and the fund value at retirement may be less than the payments you have made.

This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.

About the Author

Victoria Cochrane writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.