Husky Pensions for Newbies

Pensions for Beginners September 2016

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Pensions sound dull and dreary, particularly when you’re young. Often we dismiss them as irrelevant because, let’s face it, it’s years until we retire and there are many more things that could matter before we get there. Then again, we know that putting some money aside now for when we’re older probably makes sense, and more and more employers are now giving us the chance to have a pension, so maybe we should care? Perhaps the reason we don’t want to think about pensions is because we just don’t understand some of the basics, and if we did, we might begin to see their importance.

If that’s you, here are a few questions you might have!

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Pensions…who cares!

Cutting through financial complexity for small business employers

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What is a pension? Essentially, it’s a long-term savings plan that allows us to tuck away money for later life, and get some favourable tax benefits along the way when compared to other ways we might save.

Is it just like my bank account? Whilst pensions involve saving, just as we do into a bank account, the pension is more long-term and you can’t just take your money out anytime you want. It has the advantage though that in most pensions, the money we put in is topped up, either by our employer or the taxman (or both!)

Should I bother with a pension at all? A pension is just a way to get us saving so we have a better chance of a comfortable lifestyle in our old age, important when we’re all living longer these days. For most of us, it is generally viewed to be something we should do, and the best means to do it, because unless we’re lucky enough to be very wealthy, the state pension probably won’t be enough.

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Starter for ten


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Most of us save into a pension scheme provided by our employer because it’s convenient; after all, wages are the main way we earn money, so it’s easiest to tuck a little away regularly from there. But you can also set-up a personal pension yourself if you want, perhaps if you’re self-employed or want to save more for retirement than your employer’s scheme allows. And of course, the state can provide us with some kind of pension benefit.

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What types of pension are there?


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Currently, if we’ve worked during our life, we’re entitled to some kind of pension from the government when we reach the state retirement age; how much will depend mainly on how many years we’ve worked. Of course, what the state pension is right now might not be the same when we come to retire, and chances are it won’t be enough to have the lifestyle we’re used to. That’s why it begins to make sense to save extra into a private pension scheme.

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What’s the difference between the state and a private pension scheme?


| Confidential How do pensions work? These days, most pensions don’t guarantee today what we’re going to get when we retire. Instead, we build up a pot of money which is invested along the way. When retirement comes, we can draw money from this pot in several ways, but how much that is will depend on what we put in originally, how well that investment did, and of course any charges that have been made.

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How can I choose a pension? If our employer provides a pension scheme, and it is now becoming mandatory for all businesses with employees to do this, then the main choice is whether we want to join it or not. Given that our employer will add to the amounts we put in, people usually think it’s a good idea to join; indeed, changes in the law mean that we’ll be automatically joined up unless we specifically choose not to. Once in, we’ll have some flexibility to choose exactly how much we want to save, and pick where the money is invested from the possibilities that our employer provides. And nothing stops us, if we want to save more, or have greater investment choices, from setting up-up a personal pension just for ourselves as well.

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When should I start saving into a pension? For most pensions being started these days, the final amount that we’ll get in retirement will depend mostly on how much we’ve saved, and how well the investment has performed, up until then. Having more time should help, so to have the maximum chance of a reasonable pot of money, getting going as early as possible is best. Don’t worry if you haven’t done anything to date; it’s never too late to start.


How much should I put in? Obviously, saving into a pension reduces the money that we can spend now, so it’s a matter of putting aside what we can, when we can. For a pension provided by our employer, there will probably be a minimum amount that has to be saved, with the possibility to put in more if we want. Don’t forget, the taxman currently tops up what is saved, so that extra money will depend on how much we contribute.

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Can I have a say in how my pension is invested? Generally yes, there may be a choice of ways in which our contributions, plus the extra amounts from our employer, are invested. These choices will probably reflect different levels of risk. Low risk choices mean less chance that our investment funds are reduced, but of course give less possibility also for the final pot to grow, and vice-versa for higher-risk choices. How we invest is a matter of personal preference, and might vary as our age and circumstances change


When will I get my pension pot? Whilst waiting as long as possible is generally thought to be best, given that it gives the most time for the pot to increase, we can potentially start to withdraw some money from our pension when we reach 55. However, there are rules on how much this can be without you paying back some of the tax benefit, and the provider of the pension will advise on the various possibilities.

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Employer-provided and Personal Pensions are normally felt to be a good way to save for retirement, particularly given that the State Pension is unlikely to provide us with the lifestyle that we’re used to. In addition, they give us the chance to get extra money from the taxman as well as our employer. But they require giving up some of the money we earn for a long time (though removing temptation can be good), and for most pensions started nowadays, we won’t know exactly how much we’ll get until we get much closer to retirement.

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What are the main pros & cons of a pension?


| Confidential So where does this leave me? There are probably other questions on your mind now about a pension, but hopefully, you’re on your way to understanding what it all means. This information is not meant to be exhaustive, and depends a bit on you.

A Workplace Pension is actually a valuable benefit, and for many of us, the first chance to save long-term, so it would be a shame to miss out just because we didn’t know a few of the basics.


About Husky Finance Husky Auto Enrolment is a workplace pension service designed specifically for small and micro size employers. The service allows small businesses to compare pension providers based on their specific needs. The service takes care of the ongoing administration required to assess a workforce accurately, calculate contributions, and ensure small business schemes remain compliant at every payroll with the lowest effort possible. T. 0800 044 8114 [email protected] www.huskyfinance.com

NB: This presentation is not for publication and may not be sent to retail investors. It is for illustrative purposes only and may not be construed as an offer to sell or distribute securities. | Confidential © 2016 Husky Finance. Husky Finance is a trading name of Financial SatNav.

Husky Pensions for Newbies

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