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UK Pension FAQs

UK Pension FAQs
Published:  22 Feb at 6 PM
Why do you need a pension?

Unless you have a lot of money, pensions are a vital way of ensuring that you have enough money to live-off when you retire. With men being able to look forward to around sixteen years of retirement on average considering the current retirement age of 65 and women lucky enough to have an average of twenty six years of retirement after 60, it is obviously essential that you save enough and in the right way. And that’s just the most recent figures, with advances in healthcare and technology, it will almost definitely be higher by the time we reach retirement.

How much should I save for a pension?

Most people hope to retire on two thirds of what their salary is at retirement. Very few get there. To achieve this (unless you are lucky enough to have worked all your life for an employer with one of the best final salary schemes) depends not only on how much you save but also on how well your fund managers perform. But, regardless, the sooner you start saving the better. The later you leave it the higher your payments would have to be.

Can I have more than one pension?

You can have as many personal pensions as you like provided that added together all your payments do not beat your annual or lifetime limits. The only people likely to do this are the very, very well paid as the annual limit is now £255,000 and the lifetime fund limit stands at £1.8m. You can only contribute to workplace pensions whilst you are actually an employee.

What's the best way to buy a pension?

As with any purchase that will directly affect your future, it is important to get advice on which is right for your needs and circumstances. In addition to making the right choice of pension product, you also then need to ensure you choose the right pension provider so it can be somewhat of a minefield. It’s difficult finding your way round this minefield but with the right guidance you can accurately select the right one and this often comes in the form of an Independent Financial Adviser. They can often provide you with advice on which is the best option and in many cases come up with a tailor made plan.

What happens to my pension when I die?

If you passed away before your retirement your pension pot will typically be given to your descendants or beneficiaries. To avoid inheritance tax you should ensure you have put your pension fund "in trust".

Can't I just use my State Pension?

Some people may be of the opinion that they don’t need to waste their hard-earned savings on putting it to one side for later life when they will be given a pension by the government anyway. But with the government funded pension being around £100 a week without means testing, if you leave it until you reach retirement you will be looking at quite a struggle to get by, especially if you are still paying a mortgage or any other loans.

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