Deciding on your pension plan is a monumental decision as it will affect the success of your retirement and the quality of your life once you retire from the workplace. Saving for your retirement is more important than ever as we are living longer and leading more active lives in retirement. Careful consideration must be given to where your income will come from when you retire. When deciding what pension is best for you, the best option will be the one which is most suited to your own personal circumstances and work situation. Read on to discover what pension is best for you.
The state provision for retirement is the state pension which will provide you with a basic level of income, provided you meet the qualifying criteria. You will need to decide whether this level of income will be enough for you to live on. If it is not, then you will have to consider how you will supplement this income.
If you are currently employed, your employer may have available to you an occupational pension plan. These are set up by employers and can provide a tax free lump sum and pension income in retirement. Your lump sum and pension will be based either on your earnings or on the value of your retirement fund. The advantage of these schemes is that your employer helps pay towards the cost of the benefits.
Personal Pension Plan
If you are currently employed or self-employed, you can open a personal pension plan. This is a private policy which can be opened by anyone in receipt of a ‘pensionable income’. With this type of pension, only the pension plan holder can make the contributions and not the employer. The biggest advantages of this type of pension plan is that you are free to decide how much to contribute and you have the ability to stop and restart your pension contributions at no additional cost.
Personal Retirement Savings Account
Another option is the opening of a Personal Retirement Savings Account which is a long-term personal retirement account that allows you to save for your retirement in a flexible manner, this feature makes it appealing to people with no pension provision. Your Personal Retirement Savings Account takes the form of an investment account. One particular benefit of the Personal Retirement Savings Account is that it allows you to change employment and continue to use the same account.
Additional Voluntary Contribution Pension
An Additional Voluntary Contribution pension is one which you can hold in addition to the pension provided by your employer. Additional Voluntary Contributions have the effect of improving your overall retirement benefits as you are permitted to make extra contributions to your pension in addition to your normal contributions. There are also considerable tax benefits to be realised by making Additional Voluntary Contributions.
When making any decision in relation to providing for your retirement, you should always have a discussion with an experienced pension advisor concerning your options and what the best pension is for you.
Carlo Cretaro is a freelance blogger and social media consultant for a range of Irish and UK businesses including Orca Financial.