It is very important to save money for your retirement while you are still in productive age because you still have a lot of resources to fund your pension. However, it is a little bit tricky to choose which kind of pension program that will help you in achieving the retirement life of your dream. A financial advisor can enlighten and help you to make the right decision. However, it is in your best interest to have great familiarity with the available pension options. In this article, you will find out the pros and cons between workplace and self-invested personal pensions to help you make a better understanding of which one to choose.
When talking about investment, people tend to look for flexibility, as market fluctuation can happen anytime and is not easily predicted. Therefore, if the pension program offers flexibility, it tends to attract more investors, as their contribution amount can differ every month. It is the most ideal option for employees who don’t have a fixed monthly salary. On the other hand, the pension scheme that is offered in most companies only has one contribution arrangement. It doesn’t accommodate the common condition where most workers move from one company to another throughout their career stages. Therefore, SIPP pension transfer is highly recommended in terms of flexibility, as it can combine all pension funds from your previous job into a pension pot that you choose
- Variety of choices
SIPP generally provides different types of investment schemes, including significant shares in the company, real estate, and land. As a result, you have more freedom to pick the pension scheme that you preferred that can give you a lot of benefits in return, instead when you are registered to the workplace pension scheme, you don’t have a lot of options.
- Tax efficiency
It is important to pay attention to the number of additional expenses like tax and administration costs that are obligated to be paid while investing, as no one wants most of their savings to be cut down by tax and other fees. If you use the SIPP option, it does charge additional costs for management and administration, but it is reasonable because it is more flexible than the other pension scheme. On the other hand, the workplace pension allows you to reduce the amount of tax you pay, as you voluntarily give up a small portion of your monthly wage for this tax-efficient benefit. Both have different advantages, but it is important to understand that SIPP will be much more beneficial and economically favourable for pension pots with a significant amount of money.
Those are some aspects that you can add to your consideration before deciding on your pension scheme. Both schemes certainly guarantee you different benefits and it might result in another confusion about which one to pick. You don’t have to worry about making poor investment decisions. UK pension transfer enables you to still save your funds in SIPP, even though you are registered to a pension program from your company. This way, you can enjoy the advantages of the two pension pots.