Pension vs Savings?

brennen589 · Apprentice Joined: 04 Apr 2008 Posts: 1

I've been running my own business for 20 years without paying any pension contributions. Recently I became aware that I'm getting older and started to think about my future. I'm clueless about anything that has to do with pensions, so my big question is: should I start to invest in a pension fund? Is there any difference if I take some saving account, or maybe I should invest in property to ensure a decent amount per month? Should it help to consult an IFA, and how can I recognize the good one?

cale1768 · Apprentice Joined: 24 Jul 2009 Posts: 1

Pension is always a better choice then just putting the money into a high rate savings account. The reason is simple: you can think about pension as a tax wrapper, savings account isn't. With savings you will never get a bigger growth as you will with pension. Pension is tax-free so you can use tax relief and since you run you own business you can use your company to make a good deal with contributions. Pension package will protect your money from inflation, too. Here is how to calculate the lump sum you need if you decide to take my advice. If your rate of income in retirement stands for 5 percent and your income is, for example, 5000 pounds, that means that you would pay 100 pounds a year. Compare your numbers to this calculation and when you do the math decide whether it is convenience for your status. Since you run a company I would expect you to have more knowledge of finance. I'm surprised a bit that you didn't realize that sometimes you need experts to do a job you are unable to do. If you are encountering problems you should take an advice from IFA(Independent Financial Adviser) and let him deal with your situation. You can recognize a good one by his presentation. If he talks about strategy, information and research he has done you may consider him reliable, but if he has a sweet talk, offering just a bit of useful information you would know not to trust him. In every profession there are rotten apples, so don't be mistrustful to all of them.