Wondering what to do about your pension? You’re not alone. Many people are put off the idea of having their own personal pension, as the process can often seem overly complicated – but it doesn’t have to be. There are many articles and resources online that can help you along the process. For example, Nutmeg offer an online pension pot calculator that can help you plan and predict for your future goals.
Check out our three key benefits of having a personal pension, and start working on your future today.
- Simple and easy
If you are looking for a simple and easy pension that you don’t have to worry about, a stakeholder pension might be the best bet for you. These pension options are simple and straightforward, and can be drawn from age 55 onwards with a tax-free lump sum of up to 25% taken immediately.
If you are under age 75 you can pay into a stakeholder pension, and you can invest up to £3,600 each year.
- Low cost
It doesn’t cost that much at all to have your own personal pension – and this is particularly true with stakeholder pensions. These schemes don’t impose penalties if you change or stop contributions, or if you transfer to a different scheme.
As well as this, paying into a personal pension ensures you get tax relief. This is true even if you don’t pay tax. The tax relief forms part of your annual limit, and higher rate taxpayers can claim extra tax relief based on what they pay into their pensions.
- Smart investment
If you’re looking for a pension that has the potential to grow and you don’t mind taking on some risk, you may be more interested in a SIPP. Stakeholder pensions are designed to be simple, so as a result they include low to medium risk investments, meaning low returns as a result. However, a SIPP offers more flexibility, but with that comes more risk. If you are comfortable with that, then a SIPP could be a great option for you.
SIPPs can come in a variety of different shapes and sizes, so it’s important to do you research on any potential SIPP before you decide where you want to put your money. However, as more low-cost SIPPs make their way onto the market, they are becoming an increasingly affordable option for those who are not interested in the low returns offered by stakeholder pensions.
No matter which pension option you choose, the security in knowing that you have a personal pension goes a long way towards ensuring that you are prepared for the future.