Personal pensions

With state pensions no longer able to provide you with a healthy retirement package you may decide you need to shop around for personal pensions.

These are a way of making regular savings for your retirement and can be made in addition to your occupational contributions and you state pension. If you are self-employed or are not making contributions to an occupational pension scheme you should consider a private scheme very carefully.

You can get a personal pension from institutions such as insurance companies and banks that invest your contribution. When you retire you then use all the savings to buy an annuity, a regular income for the rest of your life.

How much you contribute is very much down to you, and will mainly depend on two factors. The level of income you want to earn in retirement, and the number of years you contribute to the scheme. The best advice is to start as young as possible in order to prepare well for your future and allowing you to contribute less each month. In most cases you can start with a fairly small monthly contribution, that you can then increase as you earn more. While private pensions usually provide holders with a healthy annuity, it must be pointed out that none can guarantee the rate of return.

What about stakeholder pensions?

Stakeholder pensions are flexible, portable and allow you to start with particularly low contributions. Launched in April 2001, stakeholder pensions must meet a set of minimum standards to ensure value for money and may be more preferable to you, depending on your circumstances. For more details you should visit the Pension Guide Website www.pensionguide.gov.uk/.

Choosing your pension

Choosing a personal pension demands great care and you spend time shopping around, comparing different providers’ charges and returns. Before you choose, be sure it suits your needs. If you stop making contributions it could cost you a great deal of what you have already put in so find out about the penalties for changing schemes. If you do need a break from contributions, you will probably happiest if you chose a stakeholder pension, or another scheme that offers flexibility.