Don't put off today what you will need tomorrow
Sunday 29 June 1997
Nowadays it is possible to set up a pension scheme with just a short phone call: so there really is no excuse for delay. A few simple statistics may encourage you to get cracking. The difference between having money in a pension scheme for 40 years rather than 25 is enormous. Instead of putting 5 per cent or 6 per cent of your income into a pension scheme, you may have to put 12 per cent, 13 per cent or even 14 per cent of your income aside to achieve the lifestyle you want when you retire. A man who could have started investing at 30 but delays until age 35 will see a 46 per cent reduction in pension fund value on retirement at 60, according to the National Association of Financial Strategists.
Women get an even worse deal because they tend to work fewer years than men and even those with full time careers tend to take time out for children.
Even a short career break can have a major impact on a woman's pension. Five years of time-out can reduce the size of a woman's pension fund on retirement by between a fifth and a third, according to figures produced by Flemings, a firm selling pensions direct over the phone.
That loss is particularly important for women because asthey tend to live longer than men they have to pay more for the annuity that provides their income in retirement.
But whatever the arguments in favour of getting a pension sorted out sooner rather than later, this is not something that should be rushed in to. Your pension is too important to get wrong. If you do not know where to start, it might be worthwhile visiting an independent financial adviser. They will be able to help you to decide what sort of pension you need and how much of your salary you ought to save. To get the phone numbers for three advisers in your local area, contact IFA Promotions on 0117-971-117.
Your pension provider will normally charge a plan fee that is deducted once a month from your fund. On top of that, there will normally be an annual management charge to pay of between 0.5 per cent and 1 per cent. That is automatically taken out of your fund. Some pension providers will also charge what is known as a "bid-offer spread". This is the fee for buying and selling the investments that make up your fund. It is charged as a percentage of your monthly contributions and deducted from those contributions. Some pension providers do not levy a bid/offer charge but that does not necessarily mean you are getting a cheaper deal. What they will do instead is reduce your "contribution allocation". Every time you give Marks & Spencer pounds 50, for example, they put 95 per cent of it into your fund. Legal & General levy a high 5 per cent bid/offer charge, but they compensate for that with a 102.2 per cent allocation rate.
When you discuss a direct pension over the phone, you can ask as many questions as you like about the product on offer. So make sure you have thought through issues such as when you want to retire. It is important to remember that you are not committing yourself to anything with the phone call. All the necessary documents will be sent to you in the post; if you don't want to take out the pension, dump it in the bin.
Simon Read: The point of having protection insurance? The right cover can help reduce your financial concerns at a time of extreme worry
19 December 2014 07:30 PM
In May Nicola Groves got a massive shock. The 45-year-old mother of two was told, bluntly, that she had breast cancer. "When I heard the words, 'You do have breast cancer and you are going to lose your breast', I felt as if time stood still," she says.
19 December 2014 07:30 PM
It's that time again when the media looks back over the past year and forward to the next. I am reminded of an old film, The Day the Earth Caught Fire (1961). Near the end of the film a newspaper prints two headlines – which one it uses will depend on whether the world is saved or doomed.
12 December 2014 05:42 PM
The supermarket banks have always excelled at offering simple, no nonsense products, and savings accounts is another area in which they fare well
12 December 2014 06:17 PM
The sun is shining on people who struggle to heat their homes and it’s thanks to a sense of community
12 December 2014 06:23 PM
Struggling people need help, understanding and forbearance, not ill-thought-out pronouncements
12 December 2014 06:20 PM
You won’t find me bashing the banks for the sake of it, but sadly they’ve deserved all the criticism that’s been sent their way in recent years
12 December 2014 06:02 PM
Gillian Guy, chief executive of Citizens Advice: 'The injustice of shock bills for crime victims must end. The Government must stand up for consumers and cap bills from lost or stolen phones at £50'
12 December 2014 05:57 PM
Stirring the pot: the Indian Government’s reforms of labour rules offer hope of a brighter future for businesses
12 December 2014 05:53 PM
Knight of the road, look out: you’ve got a new rival
06 December 2014 12:00 AM
Simon Read: The Chancellor has stamped on an unfair tax. But will the delight of homebuyers mean misery for others?
06 December 2014 12:00 AM
Were you surprised by the sudden reform of the rules for stamp duty on property purchases? I certainly was. I've been calling for ages for a change in the tax to make it more fair – and, at a stroke, George Osborne did just that on Wednesday in his Autumn Statement.
29 November 2014 12:00 AM
21 November 2014 04:33 PM
With some people are weighing up whether they will be better off cashing in their final salary pension next spring, Samantha Downes asks the experts
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