BrilliantWithMoney

In the first of a new series of ‘top ten tips’ we look at the points you should consider when starting a pension.

Pensions remain an important retirement planning tool, offering valuable tax relief on contributions and a tax efficient environment in which your money can grow. But they can sometimes be difficult to understand.

Use these top tips to start planning your own retirement strategy and to make sure you understand how pensions work before you get started.

1 – Before you start planning for retirement, make sure that you have a good plan to repay any debt that you have. Saving for the long-term is obviously important but short term debt (credit cards, overdrafts, storecards, etc can get you into real financial difficulty if you do not keep up the payments due on them.

2 – Find out if your employer (if you have one) has a pension plan to which they will contribute. Very often you will also have to make a contribution to join an employer sponsored pension plan but it makes real sense to benefit from any payment available from your employer.

3 – Think about the alternatives to a formal pension plan. You may for example need to access the money that you are saving ahead of your anticipated retirement age. If that is likely to be the case then a savings and investment plan such as an Individual Savings Account (ISA) maybe more suitable for you.

4 – Make sure that you choose a pension plan with low management charges so that your contributions can work hard for you. Avoid any plans that have high set up costs or exit penalties if you decide to transfer your pension fund elsewhere or retire early.

5 – You will want to have a pension plan that offers a wide choice of investment funds so that you can invest your pension contributions in a suitable manner. Remember that most pension investment funds can go down as well as up in value but some will be more suitable than others for you (take a look at some of the SIPP portfolio ideas that we have created for BrilliantWithMoney SIPP customers)

6 – Some people have decided not to save for retirement by using a pension plan because they have lost confidence in such plans. They think their money would be better off in a cash account earning interest. Of course there is no reason at all why your pension plan should not be invested in cash earning interest; so that you get all the tax benefits but remain in cash.

7 – Your chosen pension plan should allow you to access valuations online any time that you want. Many old fashioned pension plans are paper based and to know what your plan is worth you have to phone or write to the plan provider. Choose a plan that safely allows you to do this online just like you might do with your bank account.

8 – If you decide to change your pension plan investment fund choice you should also be able to do this online. Your plan provider should also be able to give you a lot of understandable information about the investment funds that are available.

9 – Your pension plan should be with a financially strong organisation so that you can rest assured that your pension plan is safe and properly managed.

10 – There is no reason why you should not be able to establish and run your pension plan without taking advice but if you are not confident to do this for yourself then take advice from an independent and properly qualified and experienced adviser.

The BrilliantWithMoney SIPP is low-cost, entirely transparent, offers a complete range of collective investment funds and competitive interest rates on cash; but is entirely web-based.

There is no set-up charge and no charge for contributions or transfers.  It offers access to more than 3,000 funds from over 230 fund managers, many with nil initial fund charges and discounted annual management charges.

Find out more and apply online at brilliantwithmoney.co.uk/sipp

Martin Bamford is site editor of BrilliantWithMoney and a Chartered Financial Planner at Informed Choice.