Tuesday, May 28, 2024

How to Choose a Pension Provider

A pension is a tax-efficient way of saving for your retirement. The idea is to put some of your hard-earned money aside now, ready for when you retire or for when you want to reduce the number of hours you’re working. If you want to know more about personal pensions and you’re looking for some tips on how to choose the right one for you, keep reading below.

What is a Personal Pension?

A personal pension (or private pension) is a tax-efficient way for people in the UK to save money for their retirement. You simply make regular payments into a pension scheme during your working life to create a pot of money for when you retire. Personal pensions are similar to workplace pensions, except they are organised by the individual and not their employer.

There are a number of different types of personal pensions to choose from, so it’s a good idea to do some research before choosing one that’s right for you. You may want a pension where you contribute a set amount of money each month or you may choose a stakeholder pension, which allows you to be more flexible with the amount of money you pay in.

Personal Pension Providers

Personal pensions are usually provided by insurance companies through:

  • Building societies
  • Banks
  • Your workplace

Any employee who is offered a pension through their workplace will need to find out if it’s a workplace pension scheme or a personal pension scheme. While they may sound similar, they are not the same thing. 

Choosing a Pensions Provider

There are so many pension providers on the market that it’s often hard to choose between them. To help you out, we’ve come up with a list of some of the things you need to consider when choosing your personal pension provider:

  • Search the market – you’ll need to shop around to find the best pension provider available. Take time to gather information about the different providers. This should include how much they charge and whether they have a good reputation.
  • Compare the products – once you’ve made a shortlist of the providers you’re interested in, you will need to compare their products. Ask for a key facts document for each plan you’re considering. The key facts document is a summary of all the important parts of the plan. All providers are expected to supply you with this document, so if a provider refuses to give you this information, make a complaint against them.
  • Check to see if you can afford the contributions – most personal pension schemes expect their customers to make a minimum payment each month. If you’re on a tight budget or you have an income that is irregular, then you should check to make sure you’ll be able to commit to making these payments. Before choosing a provider, it’s a good idea to work out how much you’re willing to contribute each month.
  • Find out about the charges – before choosing a personal pension provider, make sure you check to see what charges you’ll have to pay and when they need to be paid. Charges might include transfer charges, administration fees, charges for managing your investment, penalties for missed payments, or taking your money out of the scheme earlier. All of these things can affect the amount of money you will receive in the future. Remember, if you choose a stakeholder pension, these charges will be limited to a set amount.
  • Take your time – when it comes to choosing a pension, it’s important to take your time. Choosing the first pension provider you find is not the best idea. Make sure you don’t sign any documents until you’re happy with the policy, the charges, and the service they provide.
  • Look out for scams –we’ve seen a huge increase in the number of pension scams in the UK in the last few years. In 2015, a new law was introduced which allowed people to withdraw their pension money as a lump sum instead of it being paid out on a monthly basis. Many people chose to withdraw their money and re-invest it in a new investment opportunity. Unfortunately, many of these investment opportunities were fake, and people found themselves being conned out of their retirement money.

If you’re still unsure about which pension provider to choose, or how pension charges will affect you, check out the guide provided by Portafina. They are authorised and regulated by the Financial Conduct Authority and have helped over 14,000 people in the UK.  They also offer a free pension review service, which makes choosing a pension provider much simpler for you.

Things to Look Out for When Choosing a Pension Provider

As we mentioned above, different pension schemes come with different terms and conditions. Here are some of the things you need to find out before choosing your pension provider:

  • Is there an option to stop and start your pension contributions?
  • Is there a minimum or maximum amount you’re allowed to pay into the plan each month?
  • Can you pay in extra money on top of your regular contributions?
  • What charges will you be expected to pay?
  • Does the pension scheme offer investments that suit your needs?
  • How easy is it to contact the provider? – Are they available 24/7? Can you talk to them online, over the phone, etc.?
  • What help and support is available for you? – Will they monitor your investment options? Will they help you to plan for your retirement? Many people find that they need help choosing their investment options or planning for retirement, so knowing this information is extremely important.  

If you don’t currently have a personal pension, then now might be the perfect time to set one up. But before doing so, it’s important to remember to take your time and do some research into the different options available to you. Remember, different pensions have different terms and conditions attached to them, so you want to find which option will benefit you the most.

Claire James
Claire Jameshttp://www.firedigitaluk.com
Claire is an accounts manager at Fire Digital UK, an online publishing and content marketing company based in the North West.

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