Tax benefits and an convenient way to make long term savings (Personal Pension Schemes in general)

Member Name: LynnCozens

Product:	Personal Pension Schemes in general
Date:	20/05/09 (28 review reads)
Rating:

Advantages: Tax breaks

Disadvantages: The money is in there until you reach at least age 55

Personal pensions get a lot of bad press, particularly in the current economic climate. OK, so they aren't perfect but they do have plenty of plus sides too. For example:

1. You get tax relief on the contributions you pay in. That's a 20% or 40% return straight away depending upon your usual tax level. There are very very few investments that can offer you that "growth" on day one.
2. Any employer payments that go in are also tax free to the employee
3. If you get a Stakeholder pension they must by law have low charges

There are restictions / downsides too such as:

1. Set rules on when and how you can take benefits although in recent years the flexibility has increased
2. Unless you know about investment a fund managed by your provider is usually the best bet so you do have to rely on them to manage the fund well to get growth.
3. Once in the money is in there until you reach at least age 55

As with anything financial it's best not to put all your eggs in one basket so in an ideal world you'll have a pension along with other savings, paying off your debts and mortgage.

Don't let bad press put you off pensions. They are not perfect but they aren't bad and without one or a sensible and well thought out alternative financial plan that you properly action you are going to feel it in retirement.

Summary: Most people should have one as part of a balanced long term financial plan