How to Choose a Pension

The Ultimate Guide to Choosing a Pension That Is Right for You

Choosing the right pension fund is not an easy process. There are so many different options & factors to consider that it can become overwhelming very quickly.

How to Choose A Pension

How to Choose A Pension

When you start working, you mainly think of buying a car house and having some savings for a rainy day. After a few years of employment, or self-employment, you’ll start hearing people talking about pension1 plans.

For most people, the topic of pensions isn’t a favorite because it’s a reminder that you’re aging.  As much as you may want to ignore this fact, time is moving, and, therefore, saving for your retirement should not be a topic you run away from.

So, that begs the question, how do you choose a pension, and which type of pension plan is the best for you?

So First And Foremost, What’s A Pension

So First And Foremost, What’s A Pension?

Let’s get down to business:

A pension plan is an essential saving pool to which you or your employer contribute for your retirement years. Once you attain the retirement age, which is typically 55 years, you can draw out the whole amount or organize to have this money paid to you as a monthly stipend.

The concept of pension schemes has been around for a long time and is available to both employed and self-employed individuals. In some cases, the employer is obliged to make contributions while the employee can volunteer a certain amount. In other instances, you find that a specific amount is deducted from the employee, and the employer is obligated to match that amount.

The bottom line is that:

The best thing about pensions is unlike other long-term savings plans; they attract a particular amount of tax relief².

How to Go About Choosing A Pension

How to Go About Choosing A Pension

At this point then you’re defiantly wondering how to choose the best pension option. There are various things you’ll need to consider, and these have been broken down below:

The Investment Options and Risk Management

Pension plans are long terms savings, and therefore in most cases, this money is invested in different ways. It allows your savings to grow. You should make a point of finding out how the funds will be invested. Doing so will allow you to determine whether you’re okay with the investment options from a political, ethical, or even religious point of view—the more diverse the investment options offered to you, the better.

Additionally, it would help if you asked about their risk management strategies. It’s a must-have conversation because all investments carry some level of risk, whether high or low.

Their Reputation, Past Performance and Future Projections

Your pension isn’t something to play around with, and you, therefore, need to be sure the right people are holding it. That being said, you need to do your research and ask around about different pension providers. What you find out will give you some insight into how the pension has been performing in the past years.

It’s easy,

When you narrow down your options and start paying visits to the different pension providers, ask them about their future projections. It’ll help you narrow down the pensions that seem to be conservative and those that are risk-takers.

Contribution Limits and Fees

You’ll notice that some funds will limit how much money can go into your account monthly while others may not.  Remember that these limits might be the minimum or maximum amount. According to your cash flow, you might also need to keep in mind that some pension plans will only allow monthly payments while others might also accept lump-sum deposits. Therefore, it’s important to know because who knows when you might get a windfall.

Remember:

While finding out about how to make deposits, be sure to also inquire about any fees or deductibles that may be applied. In most cases, these are the details that are written in the fine print. Sometimes the pension you choose may deduct a monthly or annual amount from your pension contributions. You might also incur charges if you leave the pension scheme before the agreed-upon date.

The Account Management Options

When you set up a pension plan, you should have a way to monitor it. A few years ago this could only be done by visits to the pension office. These days, however, most providers are also offering an online option. It can allow you to monitor the account and make deposits.

What’s the bottom line?

Choosing a pension plan isn’t rocket science. However, it would help if you made a smart decision. Therefore, if you’re not sure about the type of pension plan you need, a workplace pension, state pension, or personal pension scheme, you should try and consult a reliable pension advisor or pension company to guide you. It’s a secure way to ensure that you make an informed decision.

Common Questions

How Do You Choose A Pension?

What’s the Best Pension Scheme in the UK?

How Do You Choose A Pension Advisor?

Can You Choose Your Pension Provider?

In conclusion

Choosing a pension is not an easy decision and it’s important to understand the implications of your choice.

You may also like

Editorial Note: This content has been independently collected by the EveryInvestor advisor team and is offered on a non-advised basis. EveryInvestor may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.
Taylor Holt - 300x300

Written by
Taylor Holt
Estate Planning Expert

Taylor Is Our Resident Estate Planning Expert. He Knows That Everything Revolving Around Wills or Funeral Planning Can Be a Sensitive Subject That People Don’t Like to Discuss. But He Also Knows How Important It Is to Know All There Is to Know About It. Taylor Makes It His Mission to Spread Awareness About Estate Planning, and We Believe Everyinvestor Is the Best Platform to Do That.

Monique - 300x300

Written by
Monique Pittman
Pensions Expert

Monique Is Our Resident Pensions Expert. Many People Postpone Planning Out Their Pension, Thinking That Is Something They’ll Have to Worry Much Later in Life. Monique Knows How Important It Is to Start Planning Your Pension Early, and She Wants You to Know It Too!

Choose A Pension

Written by
Lisa Schilling
Insurance Expert

Lisa Is Our Resident Insurance Expert. She Knows How Important It Is to Be Ready for Any Scenario, Especially When a Family Member Is Involved. Nobody Likes Being Found Unprepared in a Tough Situation! Lisa Can Find the Best Insurance to Cover Your Every Need, Present and Future.

Doyle Edwards - 300x300

Written by
Doyle Edwards
Mortgages Expert

Doyle Is Our Resident Mortgages Expert. He Comes From a Long Line of Financial Gurus, and It Truly Shows. Despite His Young Age, There Is No Question He Cannot Answer When It Comes to Mortgages, and His Ability to See Outside of the Box to Find the Best Mortgage Deals Is Truly Impressive.

jason stubbs 300x300 1.jpg

Written by
Jason Stubbs
Equity Release Expert

Jason Stubbs Is a Specialist in the Equity Release Sector. He Enjoys Helping Older People Who Are Struggling Financially Get Out From Under Financial Pressure.

rachel w.jpg

Rachel Wait
Personal Finance Journalist

Rachel is an experienced finance journalist and editor with a particular interest in personal finance and consumer affairs. She has vast experience writing about money issues, property, insurance, and consumer affairs, and you’ll find her articles regularly featured in top media and newspaper publications.
francis.jpg

Reviewed by
Francis Hui
Senior Risk Manager

Having held various high-level roles across the industry, Francis is truly an expert in aiding UK citizens in their financial decisions and risk analysis. His unique insight and statistical knowledge make him the perfect person to help you take your financial future to the next level.
Mark Patterson

Written by
Mark Patterson
Mortgage Expert

Mark Patterson is a well-known expert in mortgages. He has been working as an expert for over 15 years, and he specializes in the UK mortgage market.
kath icon.png

Katherine Read
Consumer Affairs Writer

She writes on the topics of equity release, home reversion, and mortgages.

Nicola Date

Nicola Date
Writer & Journalist

Nicola is a financial writer for EveryInvestor and is passionate about the opportunities that equity release can open up for homeowners. Her extensive business experience and deep understanding of the industry means that she’s always up-to-date with the latest developments.