Getting a pension plan is probably the wisest decision that anyone can make. It is an assurance of a fixed monthly income after retirement. However, in order to make this a reality, you have to make sure that you make the right pension-related decisions during the early stages.
The Do’s of Pensions
One of the most important Do’s of pensions is that you have to start early. The most appropriate time to start saving into a pension plan is when you get employed. Most employers offer annuities at employment. The sooner you start saving up, the more the funds you will get once you have retired. Another benefit of starting early is that you have the option of making lower contributions since you will be doing so over a long time.
Before you start saving money into an annuity scheme, you must learn more about the charges and fees of the pension. Doing so will help you make a decision on whether to pay annually or monthly. It will also give you an idea of the exact amount will be deducted from your monthly earnings. You can also choose to make additional voluntary contributions. These contributions will help you increase your funds especially if you started paying the pension late.
You also have to monitor your pension fund closely. You can request monthly or quarterly evaluations that will help you keep track of your savings. Finally, always ask questions before deciding on buying a pension plan as this will keep you from making wrong decisions.
The Don’ts of Pensions
One of the biggest don’ts is that you should not fall for the first pension plan that is offered to you. Sometimes, individuals get convinced into buying a pension plan that does not suit their needs simply because they did not shop around for more options before making a decision. Other times, the financial advisers provide wrong or inadequate information causing individuals to become victims of mis-sold pensions.
What is a Mis-sold Pension?
Individuals get mis-sold pensions because of failure to understand the terms of the pension plan, ill-advice from financial advisers, failure to consider such issues as medical conditions and ignorance. Basically, having a mis-sold pension means that you are paying to a plan that does not meet your criteria, hence is not suited for you. A mis-sold pension could cause you to lose money that was intended for your retirement, or benefits that are associated with the final salary pension and in worse situations, both. One of the most commonly mis-sold pensions is the SIPP.
What is SIPP?
An SIPP, otherwise known as a Self-Invested Personal Pension, is a form of defined benefit pension that allows individuals to choose their own investments from a wide range of options. The main benefit of SIPPs is that it makes it easy for individuals to manage their pension as they can keep track of it online and make changes when necessary. Like other types of annuities, with SIPPs, the government pays in an extra twenty per cent in the form of a pension tax relief. The reason why SIPPs are commonly mis-sold is that not all people are bold enough to make investment decisions and equipped adequately to run their own defined benefit pension. This type of annuity is ideal for people in business and ill-suited for standard investors because of the flexibility involved.
If you are a victim of a mis-sold SIPP, you can always make an SIPP claims. This means that you will be asking for compensation for the money invested in the scheme. You will only be eligible for the compensation if the decision to buy the plan was encouraged by a financial advisor if the advice was false and the information provided was shoddy. It is always essential to get claims advice when embarking on SIPP claims or any kind of mis-sold pension for that matter. Once you get claims advice, you can be prepared for what is to come.