As we get older, it becomes increasingly important to consider setting out plans for our futures post-retirement. Without a regular income, retiree’s rely on pension schemes in order to live a fruitful and comfortable life after finishing their last day on the job. Here in the UK, all citizens pay into a system that enables us to access a state pension, however, many of us also look to invest in a personal pension scheme too.
There are a huge variety of benefits that a private pension scheme can offer over the state, yet, with a myriad of schemes to choose from, it can feel like an uphill battle trying to find the right investment for you. Luckily, if you’re struggling to traverse the complex gauntlet of pension schemes, you do have the option to enlist the expertise of a pension advisor.
Offering professional and bespoke advice to their clients, a qualified personal pension advisor can truly make the crucial difference between you investing in a sub-par scheme and one that perfectly fits your circumstances.
Before delving into the realm of private personal pensions, it can be useful to understand the state pension that you are entitled to as a tax paying citizen. In layman’s terms, the state pension is a payment by the government which can be claimed by anyone who has paid a certain amount in national insurance and has reached the state pension age. The current age you must be to receive the state pension is 65 for men and 60 for women; you must also be earning at least £166 a week throughout a given year to be seen as eligible. Once you begin receiving your state pension, you can currently expect to earn £168.60 a week as of 2019, however, it depends on how much you contribute in national insurance.
Although the state pension is a great way to create a safety net in retirement, it does come with a few problems. One of the biggest issues with the state pension is how the above information can change from year to year. The population is ageing, with 18% of the UK population being over 65 years old in 2016. As this trend continues to grow, it becomes increasingly likely that the state pension age will increase, as it has already done.
As a result of this, state pensions are quite rigid as you must wait until you hit the pension age which is looking to be around the 70s for younger generations. With this in mind, a private pension can be a much better option.
In direct contrast to a state pension, a personal retirement plan offers substantially more flexibility. As a personal pension is a private investment, you are able to both choose how much you want to invest into it and when you would like to access it, rather than having to wait or fulfil specific qualifiers.
There is also the added benefit of receiving tax relief from your investments into a personal scheme. If you or an employer pays into a personal pension, you automatically get 20% tax back from the government which goes straight into your pension pot. If you’re a higher tax earner, you can claim additional tax breaks for your pension scheme.
Finally, the more personal pensions are active, the less pressure there is on the government, allowing for tax breaks for all taxpayers in the future.
Do you need a pension advisory service?
Although a personal pension scheme is one of the best ways to invest in your future post-work, it can be a daunting process to invest in the right plan for you. With this in mind, a pension advisor can be a huge benefit during the planning process.
Pension advisors, also known under the more general term of financial advisors, are split into two different categories; independent financial advisers (IFA’s) and restricted advisors. Both are able to offer sound financial advice but work in slightly different ways. An IFA is able to offer their clients an unbiased view on a varied range of investment products, whilst restricted advisors give specialist advice for clients within a specific area i.e. pensions.
An advisor, depending on the type you choose to work with, will then begin to talk you through the various options available. At this point, it’s important to delineate between ‘advice’ and ‘guidance’. Whilst guidance offers you information on all of the options available, it lacks the specificity that bespoke financial advice can offer. Financial advisers can pinpoint certain pension plans that would be suitable to you and are tailored around your current situation and goals. This has the benefit of minimising the chance of you choosing an unsuitable plan and ensuring you get the most for your money in the long-run.
There are also certain protections you can expect to receive when working with a financial adviser as certain guarantees are put in place. As mentioned above, receiving financial guidance from your bank, for example, will leave you with a multitude of options to choose from and no recourse if you pick the wrong scheme for you.
On the other hand, a financial adviser has a legal obligation to offer you only the best plan for you. If you end up losing money after choosing a certain plan advised by your pension planner, you have legal recourse to seek reimbursement. This is covered by the financial ombudsman service or the Financial Services Compensation Scheme, meaning that you can rest assured that your money will be put to best possible use for your future.
Although financial advice can make a huge difference to your pension pot, however, it is crucial that you work with a fully qualified pension planner in order to get the best possible results.
For starters, it is essential that you ensure that your chosen pension consultants are fully authorised by the Financial Conduct Authority (FCA). You can easily check to see if your chosen financial adviser is authorised by visiting the FCA website.
There are a host of websites that act as databases for FCA approved financial advisers and, with review websites such as Yell giving you an even deeper insight into their credentials, it’s now easier than ever to find a qualified financial adviser near you.
The next step will be to have a preliminary meeting before putting any money down to invest. Don’t feel embarrassed about asking any questions you have; you’re putting a significant amount of money down so it’s important that you feel comfortable with the transaction. Your financial adviser will then talk you through the process and begin creating your bespoke pension plan.
A well-qualified financial adviser has the potential to help you make the most of your personal pension plan and make your retirement years both comfortable and financially stable. If you’re in the Glasgow area and looking to maximise your pension earnings, then look no further than Maxim Wealth Management.
As financial experts, we understand how complex and stressful planning for your retirement can be, which is why our team of qualified advisers are on hand to demystify the process and help you get the most out of your pension pot.
Whether it’s tax and estate planning, optimising security benefits or choosing investment products, Maxim Wealth Management are here to help. For more information on our range of investment planning services, explore our website or get in touch with one of our advisors on 0141 764 0040.