If you’re reading this because you have no kind of pension in place then I only want you to do one thing. Start your pension right now. Not tomorrow, not later this week, right now.
It doesn’t even matter what age you are, whether you’re just starting out work and are still in your teens or you’re in your fifties and closing in on retirement age. My advice is the same, do it now.
Starting Earlier Is Cheaper
Pensions are complex products. For years I didn’t like them, I didn’t understand them and as a result I used a stocks and shares ISA instead.
While this hasn’t been a terrible choice, if I could go back in time I’d likely have split my investing between a pension and a stocks and shares ISA.
I invested my spare cash in the stock market, but I didn’t make regular contributions, I just used what was spare when I had it. This was a mistake. Don’t make the same mistake I did.
The earlier you start putting money into a pension, the less you’ll actually need to contribute. This is down to compound growth.
Maybe if my 20 year old self knew this, he’d have started straight away and I wouldn’t need to put quite as much away as I do now.
3 Things You Need To Know About Pensions
There is a lot to learn about pensions and that in itself can either delay you or put you off completely. It takes a while to get your head around them but here are three things that you need to know right now…
- Putting money in a pension is better than not doing it
- The government will give you free money if you do. Yes, really.
- Use a provider that has low fees (0.75% or lower)
I could go into more detail on any of the points above but you can and will learn more later. This will do you for now.
In no way am I financial advisor so I can’t tell you exactly which provider to use or which fund to put your money in but I do feel confident in saying it is worth doing if you haven’t already.
If you’re an employee then chances are you’re auto-enrolled into a scheme already and your employer is making some contributions alongside yours. This is good news, auto-enrollment is one of the best things to happen with workplace pensions in decades.
Self-employed Take Note
For those that are self-employed or earn under the threshold for auto-enrollment then I would advise you to set up your own and get used to making monthly contributions.
Unfortunately you’re missing out on auto-enrollment and contributions from your employer, this means it’s even more important for you to get it sorted.
Start small if you have to, it doesn’t matter.
What matters is to get the ball rolling.
For complete transparency I currently have 3 pensions.
My primary pension is a SIPP (a self invested pension where I choose the investments and make regular, monthly contributions) with Vanguard, another with Penfold and one more with Raindrop.
In Penfold and Raindrop I only have tiny amounts, I signed up for offers where they were willing to offer a free bonus and I took them (I love free money). You can read my guide on how to get £75 in pension contributions for free.
If just one person reads this post and sets up a pension as a result then I’m classing that as a result.
Go and set your pension up now.