An introduction
Saving for your retirement is one of the longest and biggest financial commitments you will make. With access to investments that other funds cannot offer, and their long-term track record, investment companies make a compelling case as part of a balanced portfolio for retirement.
And with savers now having unprecedented freedom over how they can take their pension, now is the perfect time to learn about the unique advantages of investment companies in delivering a higher or growing income in retirement.
These are pension schemes provided by your employer. They either provide you with a specific level of income in retirement depending on your salary and how long you work (‘final salary’ or ‘defined benefit’ schemes) or allow you to invest your contributions in funds or other investments to grow over time (‘money purchase’ or ‘defined contribution’ schemes).
These are pension schemes which are set up by you (though sometimes employers also help to arrange them), for example if you are self-employed and don’t have access to a company scheme. They work very much like a defined contribution occupational scheme.
However, an increasingly popular choice of personal pension is the Self-Invested Personal Pension (SIPP). As its name suggests, this type of pension gives you much more freedom to choose and manage your investments. SIPPs are generally for more experienced investors that have larger sums to invest. If you are less experienced, you may be better off with another type of pension, such as a Stakeholder Pension. If you are not sure which type of pension scheme is best for you, you should speak to a financial adviser or contact the Pensions Advisory Service (0800 011 3797 or www.pensionsadvisoryservice.org.uk).
A SIPP gives you the freedom to search out and manage your own pension investments
The rest of the guide only considers SIPPs and is intended for UK residents under the age of 75.
Read ‘A guide to getting started’ to learn the basics.
