Are Pensions Worth It?
Pensions get a bad press. Sometimes justifiably, but often not. With so much stigma around them, is it actually worth paying into a pension?
In short, probably yes. If you want to retire one day, it’s a key way of saving for your future.
Some people don’t like pensions because they don’t understand them – and I don’t blame them. Pension rules have changed so many times over the years and despite an effort at simplification, they’re just about as complicated as ever. The endless jargon can make it difficult to know exactly how they work and what you should expect.
But in simple terms, pensions are just a tax efficient savings plan. A place to save your money over the long term to help it grow into a nest egg for your retirement. If you pay in, your employer pays in and if you get some tax relief too that can add up to quite a sum over a period of time.
Yet people are still quite mistrusting. I recently heard the comment “you put far too much in compared with what you will get out”.
There’s no getting away from the fact that pensions have charges. These charges can, and do, reduce your investment return over time. That’s why it’s so important to make sure the charges are as low as possible.
In years gone by they could be quite high and it’s not unusual to hear stories of people who saved money into a pension for a short period of time only for it to be eaten away by those deductions. But that should be the exception rather than the norm. Modern pensions are much more competitively priced. If you have a pension that was started more than 10 years ago, it may be worth checking to see how much it’s costing you.
Other recent comments include “retirement is only for the super-rich” and “I can retire… when I die”. Whilst it might seem unreachable, with a savings mentality and a bit of planning, retirement might not be as far away as it might seem.
Yes, sometimes saving into a pension is low down the list of priorities after paying a mortgage, settling bills and raising a family. As with most things in life, it’s about finding the right balance between living for today and saving for the future.
Pensions are long misunderstood, but just remember they are a means to an end – helping you toward the future you want.
We’re here to give just the advice you need. We can help to demystify some of those myths about pensions and explain some of the benefits you might be missing out on. And if you’re still not sure about pensions you’ll need to have another plan, we can help with that too.