How do I start a pension?
Many people find the world of pensions pretty daunting and therefore put-off starting a pension. The truth is it's surprisingly simple and quick to do, and the sooner you start, the longer your money will be working for your retirement. A delay of just 2 years could reduce your annual retirement income by hundreds if not thousands of pounds - that's an extra holiday or two every year throughout your whole retirement.
We've put starting a pension into four very simple steps:
Step 1 - Choose a pension
If you are setting up a pension for the first time we think the HL Vantage SIPP (Self Invested Personal Pension) could be an excellent place to start. It allows you to make monthly contributions by Direct Debit or single contributions by cheque and the application form takes just minutes to complete. The HL Vantage SIPP's low-costs combined with investment choice and flexibility is why it's already the pension of choice for thousands of our clients.
The other common choices are a Stakeholder Pension or a traditional Personal Pension. Stakeholder Pensions also offer a low cost solution to saving for retirement, but the investment choices are limited - normally to about 20 funds managed by the provider of the pension. A traditional Personal Pension offers slightly greater investment flexibility but typically carry some higher charges.
Step 2 - Check you're eligible
If you are under 75 and resident in the UK you should be eligible to start a personal pension.
Step 3 - Decide how much to contribute
This is a question many of our clients ask us. We can only give a generic answer here but in an ideal world you want to be contributing as much as you can.
Generally when our advisers sit down with a client they would encourage them to at a minimum divide their age by two and then contribute that amount as a percentage of their salary into a pension scheme. For example if you are 30 you should consider contributing at least 15% of your salary. It may sound a lot, and it is not affordable for everyone but remember, to receive a basic pension income of just £20,000 a year, a male aged 65 would currently need a pension pot of approximately £300,000 (depending on the basis of the annuity). You may also find our Pension Calculator a great help. It allows you to alter the your contribution amounts to see how this impacts on your retirement income.
Step 4 - Apply
We're confident you'll find the application form for the HL Vantage SIPP surprisingly quick to complete. Why not download and print the application now or request a copy to be sent to you in the post?