Pension Planning for Millennials

The prospect of living off a pension may seem like a distant one if you are a millennial thinking about the future. They are, however, your livelihood when you reach retirement, so it is good to consider your options now. Pension retirement and planning services exist, such as those offered by Tilney, but here is some information to get you started.  

State Pension

This is the standard pension which everyone will receive at retirement age if they have made National Insurance contributions for a total of at least 10 years. The amount you receive depends on your National Insurance contributions over the years, so those who wish to have a higher state pension by retirement need to work more to earn it.

Recently, the prospect of changes being made to this scheme has been raised, with the state pension age potentially due to rise multiple times over the course of a millennial’s lifetime. Luckily this is not the only option for those looking to save money for retirement.    

Stakeholder Pension

This pension scheme essentially involves investing money into a fund which is intended to grow over time until you reach retirement. Your money is usually put into stocks and shares, and you can either choose which fund to invest in or set up a default fund.

These pensions can be offered by employers (not all of them) but you can also set it up yourself. They also offer low contributions and there is a cap on charges, which is advantageous to those on low incomes or who are self-employed. In essence, these are intended for those who want to invest their money and not have too much to do with it until retirement.   

SIPP

Compared to a stakeholder pension, the Self Invested Personal Pension is a scheme which offers more flexibility and involvement with investment. You can choose to invest in a wide range of assets, from property to shares, and successful investments can yield high returns.    

Generally aimed at those with higher incomes, these schemes also offer tax relief on your contributions, and the higher your Income Tax Band, the more tax relief you are entitled to. You can manage all your investments, but profit is not guaranteed as your chosen investment can fall as well as rise in value.

These are just some of the options available at the moment, but it is important to research to find which would be best for you. If you get it right now, you can ensure that your distant retirement is as comfortable and stress free as possible.

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