Why should I be in a pension scheme?

Why should I be in a pension scheme?

Good question.

‘Pension’ doesn’t make sense as a word, does it?

If Apple were to reinvent pensions the way they reinvented computer software as apps they might go for naming them ‘tomorrow spender’ or something like that.

So let’s just break down the language.

A ‘pension’ is jargon for a savings plan to spread your money out so you can spend some of it when you’re too old to work. It might be difficult to imagine today, but at some point, you may need to work a bit less, so you earn a bit less. Now is the best time to start thinking about that. You’ll need some money coming in so that you can buy what you need, pay for outgoings and still enjoy and pay for the things you want to do, too.

It may seem far off, but actually, having a pension now actually works in your favour. When you save up towards your ‘someday’ today by putting money to one side in a pension, you’re getting your future spending at today’s prices.

What? How?

Good questions, too. Let’s take a look at that.

The answer is found in the meaning of ‘investment’.

At the moment, each £1 you put in to a pension can turn into nearly £2.50 over 20 years (email me directly if you want to see my calculations and talk about this. I will be delighted to explain - flora@parsonagefinancial.co.uk). That’s one and a half times value added to your money, just by thinking about pensions now.

Save for Tomorrow? But I need it today!

As we covered in our first blog, http://parsonagefinancial.co.uk/blog/getting-good-financial-advice/why-should-i-set-a-financial-goal/ saving is a habit worth getting in to.

It’s quite tough to prioritise tomorrow when you also need stuff today. But if you can do it, if you can make even make a small start, it will help.

Let’s imagine you could put that £1 to one side for 30 years, instead of 20 years. With the extra 10 years, it could turn into nearly £3.70.*

So what should I do?

Almost all employees can now join a workplace pension.

Join it.

If you do, your employer will match your £1 up to a point, so your £1 becomes £2 straight away.

I’m self-employed. What should I do?

With a bit of googling, you can put a pension in place for yourself, or we can help. And we do enjoy that, so please do ask.

So, should I be in a pension scheme?

In short, yes.

Or at least, that’s what we say.

If you still have questions about this, or you want to make your money make more sense, call our office or email me directly flora@parsonagefinancial.co.uk and we’ll chat.

Pension schemes take the money of today, add value to that money, and give that back to you at a time when you will need it most.

It might seem far off now but your future is ultimately yours to shape. If you choose to take control of your financial life today, you are making decisions which give your future self the assurance that, come what may, you did the best you could as soon as you could.

At Parsonage, we are here to help with that. Money is what we do. So do call us, and see what you could be doing with yours.

* Based on a growth rate of 5.3% until we prepare for retirement, then it reduces to 4.3% and 3.3% for the final 5 years. Charges included.

The value of tax reliefs depends on your individual circumstances. Tax laws can change.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit with your overall attitude to risk and financial circumstances