It’s never too early to start saving into a pension plan

THE MONEY PLANNER

QI AM in my mid-thirties and friends keeping telling me I should have a pension! When is a good time to start paying into a pension and how should I go about getting it right? I keep hearing horror stories of people putting their pension monies in overseas property and losing the lot. What is the best approach?

AMANY leave it far too late to start paying into a pension. Pensions are the best savings plan around – did you know that, for every £1 you invest, the Government will invest 25% tax free into your pension pot even if you don’t pay tax and if you’re a higher rate tax payer (i.e. you earn more than £50,000) you can claim some additional tax back as well?

It’s a no brainer to me. The problem is in the word pension.

Many equate it with old age, but the reality is everyone should be investing in a pension. When you’re in your twenties and thirties, retirement is too far away to even contemplate worrying about how much you have to save, but as time passes, the pressure builds and the conversations about when you’ll retire become more common.

A pension is nothing more than a tax deferred savings plan. In the UK every employee is offered a workplace pension thanks to auto-enrolment law. They’re set up for you, they’re typically low-cost and are a good option to consider, especially when starting out.

The first place you should look is your workplace pension, without question. If you don’t have access to a workplace pension, then set up a personal pension. You can do this easily online (I have a site called Lexo.co.uk for example), it’s nice and straightforward.

If you already have sizable pension assets, consider seeking independent advice from a certified financial planner, pensions can become complex and going it alone with large sums is risky.

My golden rule would be this: the best time to start putting money into a pension was yesterday, the second best is today.

Warren Shute is the author of the bestselling personal finance book The Money Plan. Send your questions to themoneyplanner@warrenshute.com. Get his free money guides at warrenshute.com