Are pensions the answer?

The majority of solutions for a stress-free retirement usually involve a degree of financial security, but are pensions the answer?

They’ve been the subject of much press debate in recent years, none more so than on 6 April 2006, as the Government looked to simplify matters with new rule changes. Yet despite the increased exposure, many people are still confused about the choices available, which is where sound financial advice can help you make the right choice.

Despite any adverse press coverage, a pension still remains one of the best methods of planning for retirement. The benefits include:

• Tax relief on contributions set at the highest rate you pay
• The money you invest grows free of any income or capital gains tax
• A huge range of investment options

It’s now possible for you to slot 100% of your salary into a pension plan (subject to a ceiling of £225k each year) building up a tax-free pot worth up to £1.6m. And since 6 April (A-Day) 25% of this 'pot' can be taken as a tax-free lump sum , with the rest available to give you an income for life. 

The rules for pensions may have changed - they have become simpler and easier to understand - but fundamentally the choices remain the same. 

There are three main types of pension scheme:

• Employer salary related schemes
• Employer money purchase schemes
• Stakeholder and personal pensions

Given that all of us are living longer the need to plan for retirement is paramount. Pensions are a tax efficient, structured way to build up significant savings. If we are to enjoy our latter years, contacting an Openwork adviser and developing a pension plan is a very good place to start.