Although it’s never too late to plan for your retirement, the earlier you start, the more chance you will have to accumulate the funds you will need.
In the current climate, whether you choose to focus on pension savings, alternative savings products, or a combination of both, your savings will need time to grow.
To create a retirement fund of about £225,000 over 25 years, you would have to save about £7,000 every year, assuming approximately 2% growth. Saved in an ISA, the cost over 25 years would be £175,000, compared with £105,000 if you obtained 40% tax relief on your pension policy premiums.
On the other hand, at retirement, the pension policy would provide a tax free lump sum and an income, while the funds in the ISA would be available to draw, free of tax, immediately (or they can be drawn before retirement, subject to plan rules).
Partly influenced by poor returns from pension policies and adverse publicity regarding pension companies coupled with lower annuity rates, many people are now spreading their savings between company or personal pension schemes and other forms of investment.
Do contact us if you would like further help or advice on this subject.