Pensions for all ages
How your age affects your pension planning.
With life expectancy increasing and the state pension system looking increasingly precarious, we all need to plan how we will support ourselves in retirement. However, the way you think about your pension will probably change as you grow older.
Here are some key points to consider for every life stage.
Your twenties
For many of us, our twenties are the time we start our career. Occupational pensions are often an attractive option to save for retirement as your employer may also pay into your pension pot.
There are a number of different types of occupational pension. Here are some of the most common.
Final salary schemes: the amount of your pension income is a guaranteed sum based on your salary at the time of retirement. Because these schemes place a huge financial burden on the employer, few companies offer them.
Money purchase: the value of the pension will depend on how successfully the fund managers have invested your money.
Contributory: both you and your employer make contributions to your pension fund.
Non contributory: only the employer makes contributions.
If your company does not operate a pension scheme, you could investigate private pension options through an independent financial adviser.
Your thirties and forties
While money is often tight in our twenties, many people find their spending power increases during their thirties and forties.
If you can afford to, you could start investing more into your pension fund. Additional Voluntary Contributions (AVC) schemes allow people to top up their occupational pension. Some employers will match your contributions.
Further, inflation is likely to have a bearing on the value of your pension pot. What seems like a large sum now might not feel so generous in 30 years.
Remember, you will receive favourable tax relief on any pension contributions. To learn more, check out the Directgov website.
Your fifties
Under current legislation, you can use the money in your pension to buy an annuity when you reach the age of 55.
This kind of insurance policy converts the money in your pension fund to a retirement income. To learn more, see ‘Q&A: What is an annuity?’
Your sixties
When you reach your sixties, you may be eligible for a state pension but the age at which you qualify is increasing.
Under Labour plans, both men and women will reach state pension age at 68 by 2046. If elected, both the Tories and the Liberal Democrats plan to hold a review into the state pension age.
The final stage
We’re all going to die sometime so it’s important to know what will happen to the money we've saved up for our golden years.
Many pensions pay a benefit to your heirs after your death. Death benefits usually consist of the money you have invested in your pension and any life insurance. These benefits can be in the form of a one off lump sum or a survivor’s pension.
In terms of occupational pensions, benefits are often more generous if you die while employed by the company.
**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**
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